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compare and contrast the Mondragon Cooperative Corporation (MCC) with a traditional capitalist corporation of your choice and determine how the treatment of these stakeholders impacts on ethical outcomes.

compare and contrast the Mondragon Cooperative Corporation (MCC) with a traditional capitalist corporation of your choice and determine how the treatment of these stakeholders impacts on ethical outcomes.

Assignment 3

Description Marks out of Wtg (%) Due date
Assignment 3 – Essay 100 30 16 May 2016


Issues concerning shareholders and employees are of critical importance to the good functioning of any organization. In an academic essay format, compare and contrast the Mondragon Cooperative Corporation (MCC) with a traditional capitalist corporation of your choice and determine how the treatment of these stakeholders impacts on ethical outcomes.

Word length: 2,500 words

This essay requires you to investigate the ethical treatment of shareholders and workers in a traditional, capitalist corporation of your choice and compare and contrast your findings with the treatment of these stakeholders in the Mondragon Cooperative Corporation. Please choose an organization that you admire for its ethical behaviour rather than one, such as Enron, that behaved so reprehensively that its only value these days is a “whipping boy” for ethicists.

As such, you need to investigate those issues that present as ethical dilemmas for these stakeholders and these are mentioned at considerable depth throughout chapters 6 and 7 of the Crane and Matten (2010) text. The 1982 BBC documentary “The Mondragon Experiment” is an excellent source of information about the origins and nature of the MCC and how the underlying principles upon which it based are made practical. This film can be found on You Tube (http://www.youtube.com/watch?v=2zMvktpKDmo  . Further information about how Mondragon has progressed to the current day can be found on the corporation’s website at <http://www.mondragon-corporation.com/eng/ >.

Suggestion as to how to organise your essay

This suggestion about you could approach this essay is just that – a suggestion. In other words, you are encouraged to organise your essay as you wish, presumably with a view to making the best case for your specific argument. Like all academic essays, you are required to make an argument that is convincing and well-supported by references. Again, what follows is not meant to prescriptive, just a suggestion about how you might proceed.

Firstly, review Module 2 to identify the issues that provide the fundamental points of difference between corporations and workers’ cooperatives such as Mondragon. It may be a good idea to read a little more widely to consider the political ideologies that underpin the establishment of these organizations. Doing so provides your essay with a sound theoretical foundation as to how human beings are conceptualized by those ideologies and how they relate to the major normative theories (See Fig. 3.2, p. 98, Crane & Matten, 2010). From this, good students will be able to get an appreciation and better understanding of the ethical foundation of the MCC. This is important because the major challenge in this essay is to determine how these points of difference (ideologies) manifest as ethical problems in both Chapters 6 and 7 of the Crane and Matten text.

The first paragraph in the body of the essay should outline the contrasting political ideologies and concepts of human beings and the points of difference and how they impact in terms of creating ethical dilemmas for both shareholders and workers. Subsequent paragraphs should be focussed on the relevant ethical dilemmas outlined in the text and discussion should ensue as to how these issues can/may be resolved by adopting an alternative ethical position in the way we organise.

You should be aware that you write the introductory paragraph and the concluding paragraph last. Good students will find a strong definitive position about the nature of organizing and allude to essential criteria that will facilitate ethical behaviour for both shareholders and workers. Critique of both, the chosen corporation and the Mondragon Cooperative Corporation, will be essential for a high mark.

Graduate attributes tested and developed

G1 – Demonstrate applied knowledge of business ethics and practice.

G4 – Evaluate, synthesise & critically review theoretical frameworks with other evidence to provide solutions to real-world problems.

G7 – Comprehend and address complex ethical dilemmas.

G8 – Demonstrate an understanding of complex sustainable dilemmas and the need for responsible leadership.

G11 – Communicate professionally & effectively in both oral and written communication to various audiences to achieve targeted outcomes.

Submit your assignment

Your assignment must be submitted twice as a word processing file:

  • To Turnitin, a service which checks student assignments for copying or plagiarism. The link to Turnitin for each assignment is on StudyDesk.
  • To EASE, for marking. EASE is the university’s system for electronically submitting assignments, and getting them back with feedback after they’ve been marked. There is a link to EASE on StudyDesk, or you can go directly to <ease.usq.edu.au >.

Submit your assignment to Turnitin

Use the link on StudyDesk. When your assignment is correctly submitted, it will have a red X next to it. Clicking on the X lets you delete the file.

How to understand your Turnitin report

Turnitin will give you a similarity percentage and a report on all the copied material in your assignment. To access the Turnitin report, click on the link ‘Similarity’. The Turnitin report may take a few minutes, an hour, or even a day to appear.

The report will almost certainly identify some copying that isn’t a problem, such as references, material you have put in quote marks, and common phrases. If your report shows 10% or 15% copying, it probably isn’t a problem. We don’t look at the number; we look at the assignment itself.

Sometimes Turnitin identifies copying that seems strange. For instance, Turnitin may tell you that part of your assignment was the same as part of another student’s assignment from an American university. Even though you’ve never seen that student’s assignment, this is still a problem, because it usually means that both of you have copied some text from the same source, for example, a book. Turnitin might be wrong about the place you copied words from, but it will be right to say you have copied. If you find Turnitin identifying any copying that isn’t acceptable, you are able to delete the assignment you uploaded, change it, and submit the new version to Turnitin.

Criteria for assignment 3

Compare and Contrast Rubric
Category 1 2 3 4
Purpose & Supporting Details The paper compares or contrasts, but does not include both. There is no supporting information or support is incomplete. The paper compares and contrasts items clearly, but the supporting information is incomplete. The paper may include information that is not relevant to the comparison. The paper compares and contrasts items clearly, but the supporting information is general. The paper includes only the information relevant to the comparison. The paper compares and contrasts items clearly. The paper points to specific examples to illustrate the comparison. The paper includes only the information relevant to the comparison.
40 Marks
Organisation & Structure Many details are not in a logical or expected order. There is little sense that the writing is organized. The paper breaks the information into whole-to-whole, similarities-to-differences, or point-by-point structure, but some information is in the wrong section. Some details are not in a logical or expected order, and this distracts the reader. The paper breaks the information into whole-to-whole, similarities-to- differences, or point-by-point structure but does not follow a consistent order when discussing the comparison. The paper breaks the information into whole-to-whole, similarities-to-differences, or point-by-point structure. It follows a consistent order when discussing the comparison.
20 Marks
Transitions The transitions between ideas are unclear or non-existent. Some transitions work well; but connections between other ideas are fuzzy. The paper moves from one idea to the next, but there is little variety. The paper uses comparison and contrast transition words to show relationships between ideas. The paper moves smoothly from one idea to the next. The paper uses comparison and contrast transition words to show relationships between ideas. The paper uses a variety of sentence structures and transitions.
20 Marks
Grammar & Spelling (Conventions) Writer makes more than 4 errors in grammar or spelling that distract the reader from the content. Writer makes 3-4 errors in grammar or spelling that distract the reader from the content. Writer makes 1-2 errors in grammar or spelling that distract the reader from the content. Writer makes no errors in grammar or spelling that distract the reader from the content.
20 Marks


Chapter 6

Shareholders and Business Ethics

Lecture 6


The nature of shareholder relations to the corporation

Analysis of the rights and the duties of shareholders

Specific ethical problems and dilemmas arising in the relation between companies and their shareholders

The ethical implications of globalization on shareholder relations

The notion of shareholder democracy and the accountability of corporations to their shareholders and other stakeholders

The differences in shareholder roles and corporate governance in various parts of the world

Perspectives on how shareholders can influence corporations towards sustainability

Shareholders as stakeholders

Understanding corporate governance

Crucial problem: separation of ownership and control


Peculiarities of corporate ownership

Locus of control

Fragmented ownership

Divided functions and interests

Rights and duties in firm-shareholder relations

Rights of shareholders

The right to sell their stock

The right to vote in the general meeting

The right to certain information about the company

The right to sue the managers for (alleged) misconduct

Certain residual rights in case of the corporation’s liquidation


Duties of managers

Duty to act for the benefit of the company

Duty of care and skill

Duty of diligence

Corporate governance

Corporate governance definition

Describes the process by which shareholders seek to ensure that ‘their’ corporation is run according to their intentions.  It includes processes of goal definition, supervision, control, and sanctioning.  In the narrow sense it includes shareholders and the management of a corporation as the main actors; in a broader sense it includes all actors who contribute to the achievement of stakeholder goals inside and outside the corporation

Corporate governance: a principal-agent relation

Shareholder and stakeholder relations: Different frameworks of corporate governance globally

Ethical issues in corporate governance

Executive accountability and control (I)

A separate body of people that supervises and controls management on behalf of shareholders

Dual structure of leadership

executive directors: are actually responsible for running the corporation

non-executive directors are supposed to ensure that the corporation is being run in the interests of the shareholders

Anglo-Saxon model: single-tier board

European model: two-tier boards, lower tier = executive directors, and upper tier = ‘supervisory board’

Executive accountability and control (II)

The central ethical issue here is the independence of the supervisory, non-executive board members

No directly conflicting interests ensured by:

Typically drawn from outside the corporation

No personal financial interest in the corporation

Appointed for limited time

Competent to judge the business of the company

Sufficient resources to get information

Appointed independently

Executive remuneration

‘Fat cat’ salary accusations

E.g. average CEO salary in Britain £6.5m (highest CEO salaries in 2008: Europe, €77m, USA, $84m)

E.g. average annual pay rise for CEOs 11%

CEO increases outstrip shareholder returns

Ethical problems with executive pay:

Performance-related pay leads to large salaries that cause unrest within corporations

Influence of globalisation on executive pay leads to significant increases

Board often fails to reflect shareholder (or other stakeholder) interests

Ethical aspects of mergers and acquisitions

Acceptable if results in transfer of assets to owner who uses them more productively

Central concern is managers who pursue interests not congruent with shareholder interests

Executive prestige vs. profit and share price

Two ethically-questionable options for managers (Carroll and Buchholtz, 2008)

Seduced with golden parachute for cooperation

Greenmailing to secure post-merger job

Hostile takeovers – concern when shareholders do not want to sell

Intentions and consequences of mergers and acquisitions

Restructuring and downsizing

The role of financial markets and insider trading

Speculative ‘faith stocks’

‘dot-com’ bubble (companies not made any profit but worth billions on the market)

Ethical issue: bonds based entirely on speculation without always fully revealing amount of uncertainty

Insider trading

Insider trading occurs when securities are bought and sold on the basis of material non-public information (Moore 1990)

Ethical arguments (Moore, 1990)


Misappropriation of property

Harm to investors and the market

Undermining of fiduciary relationship

Insider trading can erode trust in the market in the long term; hence its illegality

The role of financial professionals and market intermediaries

Two crucial professions: Accountants & credit ratings agencies

Task is to provide a ‘true and fair view of the firm – i.e. bridge informational asymmetry

Five main problematic aspects of financial intermediary’s job:

Power and influence in markets

Conflict of interest (e.g. cross-selling)

Long-term relationships with clients

Size of the firm

Competition between firms (danger of corner-cutting)

Private equity and hedge-funds

Rise of private equity and hedge funds exacerbate issues around transparency and shareholder control

Most general concern:

There are no longer many obligations for public information about a company once it has been taken private

Hedge funds do not have to report to regulators in the same way as other investment firms

Don’t even have to report fully to own investors

Suggestion is this lack of transparency hides systemic risk

Shareholders and globalisation

Global financial markets

Global financial markets are the total of all physical and virtual (electronic) places where financial titles in the broadest sense (capital, shares, currency, options, etc.) are traded worldwide

Ethical issues raised:

Governance and control

National security and protectionism

Speculation (see slide on Tobin tax)

Unfair competition with developing countries

Space for illegal transactions (see slide on money laundering)

Reforming corporate governance around the globe

Some important shortcomings in present systems of governance in many countries

Main tool in Europe is codes of governance, dealing with:

Size and structure of board

Independence of supervisory or non-executive directors

Frequency of supervisory body meetings

Rights and influence of employees in corporate governance

Disclosure of executive remuneration

General meeting participation and proxy voting

Role of other supervising and auditing bodies

Legal basis and power of these codes varies dramatically

And the crisis in late 2000s has seen deeper state involvement

US response – Sarbanes-Oxley

The Tobin Tax

Effort to impose control on global markets “Tobin Tax” – tax on foreign currency transactions

Not make impossible but impede international currency speculation

‘Robin Hood Tax’

Two main problems with tax:

Global enforcement

Does not differentiate between desirable and undesirable transactions

Combating global terrorism and money laundering

Deregulated social spaces are invitation for illegal financial activities

Money laundering estimated up to $1.5 trillion/year

IMF recommendations for banks to help reduction of money laundering

‘Know your customer’

Prevent criminals getting control of key positions in banks

Identifying and reporting unusual/suspicious transactions

Raise general awareness for regulators and staff

Shareholders as citizens of the corporation

Shareholder democracy

Idea that a shareholder of a company is entitled to have a say in corporate decisions

Supported by legal claim based on property rights

Can shareholders be a force for wider social accountability and performance?

Three issues to consider:

Scope of activities

Adequate information

Mechanism for change


Two approaches to ‘ethical’ shareholding

Shareholder activism

Buy shares in company for right to speak at the AGM

Voice concern and challenge the company on allegedly unethical practices

Possibility of broad media attention by ‘disrupting’ the meeting


Gets involved with ‘the enemy’

Only an option for reasonably wealthy individuals


Socially responsible investment (SRI)

Ethical investment is the use of ethical, social and environmental criteria in the selection and management of investment portfolios, generally consisting of company shares


Ethical investment
Examples of positive and negative criteria for ethical investment

Negative criteria

Alcoholic beverages production and retail

Animal rights violation

Child labour

Companies producing or trading with oppressive regimes

Environmentally hazardous products or processes

Genetic engineering

Nuclear power

Poor employment practices


Tobacco products


Positive criteria

Conservation and environmental protection

Equal opportunities and ethical employment practices

Public transport

Inner city renovation and community development programmes

Environmental performance

Green technologies

Ethical Investment

Main concerns with SRI movement

Quality of information

Most information provided by firms and is difficult to verify

Dubious criteria

See table in previous slide

Too inclusive

90% of Fortune 500 firms are held by at least 1 SRI fund

Strong emphasis on returns:

Usually, SRI fund managers screen for performance first, then select using ethical criteria

Firms taking longer-term perspectives and thus sacrificing short-term profitability therefore unlikely to be included

(See Vogel, 2005)

Shareholding for sustainability

The Dow Jones Sustainability
Group Index

‘Best-in-class’ approach

Family of indexes comprising different markets and regions (e.g. Asia-Pacific sub-index added in 2009)

Companies accepted into index chosen along following criteria:

Environmental (ecological) sustainability

Economic sustainability

Social sustainability

Criticisms of index:

Depends on data provided by the corporation itself

Questionable criteria used by index

Focuses on management processes rather than on the actual sustainability of the company or its products

Rethinking sustainable corporate ownership: alternative models?

Government ownership:

Part of the landscape in many parts of the world. Resurgent in the wake of the late-2000s financial crisis (esp. banks and cars).

Family ownership

Families may have longer-term goals, but may not treat stakeholders any better than MNCs

Co-operative ownership

Hybrid businesses, not owned by investors or managers

Owned and democratically controlled by workers or customers

Not set up to make profit but to meet the needs of members

Spanish Mondragon co-operative has made a striking contribution to sustainability while staying highly profitable


Principal-agent relationship between managers and shareholders

Divergent interests and unequal distribution of information institutionalises some fundamental ethical conflicts in governance

Shareholders have considerable opportunities to use their power over supply to influence corporations to behave more ethically

Shareholders can play a role in driving corporations towards enhanced sustainability by their investment decisions at the stock market


Chapter 7

Employees and Business Ethics

Lecture 7


The specific role of employees among the various stakeholder groups

Core ethical topics of employees’ rights and duties

Ethical issues and problems faced in business-employee relations

The duties of employees and the company’s involvement in enabling employees to live up to their duties

The notion of corporate citizenship in relation to employees

Basic issues and problems of managing employees in the context of globalization

Explore the notion of corporate citizenship in relation to employees

The implication of sustainability for workplaces and for specific working conditions

Ethical issues in the firm-employee relation

Management of human ‘resources’:
an ethical problem between rights and duties

The term ‘human resource management’ and its implications have been a subject of intense debate in business ethics

Humans treated as important and costly resource

Consequently, employees are subject to a strict managerial rationale of minimising costs and maximising the efficiency of the ‘resource’

Rhetoric and reality in HRM

Rights of employees as stakeholders of the firm

Duties of employees as stakeholders of the firm


Discrimination in the business context occurs when employees receive preferential (or less preferential) treatment on grounds that are not directly related to their qualifications and performance in the job

Managing diversity prominent feature of contemporary business

Extensive legislation

Institutional discrimination: discrimination deeply embedded in business

Women in top management positions
Female Directors in FTSE 100 Companies 2000-2008

Sexual and racial harassment

Issues of diversity might be exploited to inflict physical, verbal, or emotional harassment

Regulation reluctant

Blurred line between harassment on one hand and ‘joking’ on the other

Influenced by contextual factors such as character, personality, and national culture

Companies increasingly introduced codes of practice and diversity programmes (Crain and Heischmidt 1995)

Equal opportunities and affirmative action

How should organizations respond to problems of discrimination?

Equal opportunity programme

Generally targeted at ensuring procedural justice is promoted

Affirmative action (AA) programmes: deliberately attempt to target those who might be currently under-represented in the workforce

Recruitment policies

Fair job criteria

Training programmes for discriminated minorities

Promotion to senior positions

Reverse discrimination

In some cases, people suffer reverse discrimination because AA policies prefer certain minorities

Justification for reverse discrimination

Retributive justice: past injustices have to be ‘paid for’

Distributive justice: rewards such as job and pay should be allocated fairly among all groups (Beauchamp 1997)

Stronger forms of reverse discrimination tend to be illegal in many European countries

Employee privacy

Four different types of privacy we may want to protect (Simms 1994)

Physical privacy

Social privacy

Informational privacy

Psychological privacy

Health and drug testing

Highly contested issue

Three main issues

Potential to do harm

Causes of employee’s performance

Level of performance

Despite these criticisms, such tests have increasingly come common in the US

Electronic privacy and data protection

Increasingly relevant as technology advances and electronic ‘life’ becomes more important

Computer as a work tool enables new forms of surveillance

Time and pace of work

Usage of employee time for private reasons

E-mail and internet

Issue of privacy in situations where data is saved and processed electronically

Data protection

Due process and lay-offs

Ethical considerations in the process of downsizing

Right to know well ahead of the actual point of the redundancy that their job is on the line

Compensation packages employees receive when laid off

Employee participation and association

Recognition that employees might be more than just human ‘resources’ but should also have a certain degree of influence on their tasks, job environments, and company goals – right to participation

Financial participation – allows employee share in the ownership or income of the corporation

Operational participation can include a number of dimensions:





Evolution of trade union membership

Working conditions

Right to healthy and safe working conditions one of the very first ethical concerns for employees

Dense network of health, safety and environmental (HSE) regulation

Main issue is enforcement and implementation

Newly emergent HSE issues relate to changing patterns of work

Ethical issues in the context of:

Excessive working hours and presenteeism

Flexible working patterns

Excessive working hours and presenteeism

Excessive work hours

Thought to impact the employee’s overall state of physical and mental health



phenomenon of being at work when you should be at home due to illness or even just for rest and recreation (Cooper 1996)

Flexible working patterns

Another way of saying that management can do what it wants? (Legge, 1998)

‘Non-standard’ work relationships

Part-time work, temporary work, self-employment and teleworking (Stanworth 2000)

Less secure legal status for periphery workers

Potential for:

Poorer working conditions

Increased insecurity

Lower pay

Exclusion from training and other employment benefits

Fair wages

The basis for determining fair wages is commonly the expectations placed on the employee and their performance towards goals

Note discussion about excessive compensation for executives after the stock market collapse of 2008

Problems of performance-related pay (PRP)


salaries and benefits become less secure


individualized bargaining

Freedom of conscience and freedom of speech in the workplace

Normally guaranteed by governments

Situations in business where freedom of speech might face certain restrictions

Speaking about ‘confidential’ matters related to the firm’s R&D, marketing or accounting plans

Usually unproblematic, since most rational employees would find it in their own best interests to comply with company policy

Some cases where those restrictions could be regarded as a restriction of employee’s rights

Whistleblowing – can involve considerable risk

The right to work

Fundamental entitlement of human beings established in the Declaration of Human Rights

The right to work in a business context cannot mean that every individual has a right to be employed

The right to work should result in every individual facing the same equal conditions in exerting this right

Employing people worldwide

The ethical challenges of globalization

National culture and moral values

Different cultures will view employee rights and responsibilities differently

This means that managers dealing with employees overseas need to first understand the cultural basis of morality in that country

Raises the question of whether it is fair to treat people differently on the basis of where they live

Relativism vs. absolutism

Absolutism: ethical principle must be applicable everywhere

Relativism:  view of ethics must always be relative to the historical, social and cultural context

The ‘race to the bottom’

Many critics argue that MNCs play a role in changing standards in countries

Globalisation allows corporations to have broad range of choice of location

Developing countries compete to attract foreign investment

Large investors tend to choose country with most ‘preferable’ conditions

Lowest level of regulation and social provision for employee

Leads to ‘race to the bottom’ in environmental and social standards

Argument that MNEs have a duty to promote minimally just social & political institutions where they operate if these do not exist, because of duty to avoid harm (Nien-hê Hsieh, 2009)

Migrant labour and illegal immigration

Growing mobility of workers is a recent phenomenon of globalization

Typically north-south, can also be in other regions (e.g. UAE)

Workers can also be attracted to particular industries in areas where there is no local labour (e.g. mining)

Numerous ethical issues here. Examples:

Migrant labour often leads to questionable social phenomena (e.g. drug use)

Migrants are often from poor countries; willing to accept pay & working conditions normally unacceptable in host country

Migrant workers are often in a country illegally (but a record of employment may later be the basis for legal residency)

The corporate citizen and employee relations

The corporate citizen and employee relations in a global context

Anglo-American and European models: differences

Continental Europe takes interest of employees into account to a greater degree than the Anglo-American model


In developing countries

Level of regulation (or at least enforcement) is often poor, though employee protection often strengthens over time (e.g. China’s 2008 Labour Contract Law)

Corporate actions therefore often voluntary ‘good citizenship’

Ruggie’s framework for responsibility in human rights

Protect (states’ duty to prevent abuses)

Respect (firms’ duty to respect human rights)

Remedy (general duty to create systems to remedy abuses)

Towards sustainable employment

Re-humanized workplaces

‘Alienation’ of the individual work in the era of industrialised mass production

Brought tremendous efficiencies and material wealth, but have also created the prospect of a dehumanised and deskilled workplace

Attempts to re-humanize the workplace

‘empowering’ the employee

‘job enlargement’

‘job enrichment’

Success of such schemes contested

Suggested that ‘humanized’ approach might be more appropriate and effective in some cultures (e.g. Scandinavia) than others

Wider employment

Large numbers of unemployed people becomes the norm in many countries due to mechanisation

This threatens:

Right to work

Social fabric of particular communities

New technologies herald the ‘end of work’? (Rifkin 1995)

From sustainability perspective: ensure that what work exists is shared out more equitably

Green jobs

‘Green jobs’ are:

In industries making environmentally-friendly products

Workplace & organization of labour is also more environmentally sustainable

Gained attention in late 2000s; part of broader debate on restructuring economies to be more sustainable

Examples of specific measures:


Paperless office

Video-conferencing rather than business travel

Home-based teleworking

Potential benefits are social, economic and ecological


Discussed the specific stake that employees hold in their organizations

Discovered how deep the involvement of corporations with employees’ rights can be

Corporate responsibility for protection and facilitation of these rights is particularly complex and contestable when their operations become more globalized

Considered corporate citizenship and employee relations in different contexts

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