Cooperative Education & Promotion Fund | 10% | Education, training, social/cultural programs, community development. Legally required by Spanish cooperative law. |
| Reserve Fund | 20% | Collective, indivisible reserves for solvency and stability — cannot be distributed to members; used for reinvestment or covering future losses. |
| Member accounts (Individual Capital Accounts) | 70% | This is the distributable “profit” share for worker-owners. It’s not paid out in cash (except a small advance); it’s credited to each member’s internal account, functioning as both equity and deferred compensation.[5],[6] |
The import is Mondragon’s reinvestment comes mainly from member capital accounts and reserve funds, both of which stay inside the cooperative until withdrawal (e.g., retirement). So even though 70% of net profit is “allocated” to members, it’s not distributed as cash dividends─it stays inside the cooperative as internal capital. As a result, Mondragon keeps nearly all post-tax earnings as capital (reserves + members’ internal equity). The only cash outflow is the 10% education fund, and even that is often spent internally (training, scholarships, university funding). The Reserve Fund (20%) is held long-term, subject to equipment purchases, modernization, R&D, expansion, and as a buffer for downturns in the business. The Members’ Capital Accounts (≈ 70%) are locked until retirement or worker exit and serve as a permanent equity base to be used as collateral or working capital. The workers earn modest interest on their accounts. Education Fund (10 %) is spent each year for worker training and cooperative promotion. Essentially, 90% of the net profit is recycled internally─either into capital or human development.
Mondragon workers internal capital accounts collectively represent billions of euros of member equity; they are a stable, they are a low-cost financing source for Mondragon expansion. Because the funds are retained by Mondragon, the member cooperatives and Mondragon rely less on external debt or share issuance than typical firms. Expansion of new cooperatives is often financed through the Mondragon Corporation’s internal bank (Laboral Kutxa). In short, the system turns retained member earnings into a permanent reinvestment mechanism for Mondragon.
5. How the Net Profit Allocation Rule Applies to the CCE. In Commons Capitalism, workers do not own the enterprise. There are no ownership rights, only workers’ rights to wages and benefits. All business property is legally owned by the commons corporation, the parent entity. That property is held in perpetuity for the productive benefit of its workers similar to a charitable trust or perpetual endowment, except it is non-tax-exempt and engaged in commerce. Since there are no private owners, profits are not distributed as dividends but must be used internally according to the CCE allocation rule (e.g., 50% reinvestment, 20% social benefits, 10% education, 20% reserves). Reinvestment occurs inside the CCE system. When a subsidiary of the commons corporation earns a net profit, it remits its net profit to the commons corporation who is the sole shareholder of the subsidiary to be distributed according to the allocation rule. The Reinvestment und can be used in two ways: The commons corporation can use the net profit to modernize subsidiaries, purchase new equipment, or expand plants. It can also purchase new subsidiaries, converting capitalist firms into CCE subsidiaries.
| Feature | Traditional Corporation | Worker Cooperative (e.g., Mondragon) | Commons Capitalism Entity |
| Capital ownership | Private shareholders | Worker-members | No owners |
| Net profit distribution | Dividends to shareholders | 70% allocated to members | 50% allocated to the Reinvestment Fund |
| Reinvestment decision | Board acting for owners | General assembly | Commons corporation board |
| Expansion capital | Issued equity or retained earnings | Retained members earnings | Reinvestment Fund |
| Exit rights | Sell shares | Redeem member equity | None (perpetual capital) |
A review of the table illustrates why a CCE would be stable and scalable. No owners withdraw equity. Net Profits are reinvested. The system naturally grows the capital base of the commons (Reinvestment Fund) year over year. Each new acquisition brings more profit-producing capacity under the same allocation rule. Over time, this builds a self-expanding pool of perpetual productive capital that continually reinvests in itself and its workforce without taxation advantages or external finance.
| Subsidiary A | Subsidiary B | Subsidiary C |
Net Profits
COMMONS CAPITALISM ENTITY (CCE)
Allocates annually: 50% Reinvestment Fund 20% Social Benefits Fund 10% Education Fund 20% Reserve Fund |
| Reinvestment Fund | Social Benefits Fund | Education Fund | Reserve Fund |
| Expansion, Capital expenditures, and new company acquisitions | Augmentation of state benefits and granting Nordic-style benefits | Worker training and education programs | Extraordinary expenses, capital expenditures |
7. Sample Financial Statements. Assume a CCE subsidiary has revenues of $100,000,000 and operating expenses of $85,000,000. All numbers are in millions USD for simplicity.
Item | Amount (USD millions) |
| Revenue | 100 |
| Less: Operating Expenses | (85) |
| Net Profit | 15 |
| Less: Dividend to CCE (Parent) | (15) |
| Retained Earnings | 0 |
Note: In consolidated financial statements, the dividend paid by the subsidiary to the CCE is eliminated (since it’s an intra-group transaction). In the subsidiary’s own books, the dividend reduces retained earnings to zero since 100% of profit is distributed. In the books of the CCE, the dividend is recorded as income from the subsidiary.
Here’s the flow. The CCE receives the dividend from the subsidiary. The dividend increases the parent’s retained earnings. But if the CCE spends 20% of that amount on social benefits (i.e., $3,000,000), it records that as an expense in its own income statement. In consolidation, the dividend income from the subsidiary is eliminated (since it’s an intra-group transaction). The social benefits expense of $3,000,000 remains, because it’s a real cost to the group. So, in the consolidated income statement, you’ll see: The subsidiary’s revenues and expenses are fully included, no dividend line (eliminated), and the CCE’s social benefits expense reduces consolidated profit.
| Item | Amount (USD millions) |
| Revenue (Parent + Sub) | 100 |
| Less: Operating Expenses (subsidiary’s 85,000,000 + CCE’s 3,000,000) | 88 |
| Net Profit | 12 |
For purposes of discussion, corporate income taxes have been disregarded.
| Assets | USD millions | Liabilities & Capital Reserve | USD millions |
| Reinvestment Fund | 6 | Capital Reserve | 0 |
| Social Benefits Fund | 2.4 | Less: | |
| Education Fund | 1.2 | Reinvestment Fund | 6 |
| Reserve Fund | 2.4 | Social Benefits Fund | 2.4 |
| Education Fund | 1.2 | ||
| Reserve Fund | 2.4 | ||
| Total Assets | 12 | Total Liabilities & Capital Reserve | 12 |
The CCE is both a holding and reinvestment institution, akin to a perpetual development fund.[7] Subsidiaries operate commercially but have no retained ownership rights; they remit profits to the commons corporation. Workers benefit through receipt of wages and social benefits, not equity. Capital investment occurs via internal allocation, not external capital markets or tax incentives. Over time, the commons capital base grows geometrically as reinvested profits compound creating systemic economic democratization without ownership redistribution.
8. Analyzing the 20% Allocation to the CCE Benefits Fund. According to the Federal Reserve’s Z.1 Financial Accounts (2025 Q2), the U.S. nonfinancial corporate after-tax profits was $2.17 trillion annually. If 20% of that were devoted to CCE Benefits Funds this equals in amount to $424 billion per year (0.20 × 2.17T = $434B). According to the Bureau of Labor Statistics (BLS, 2025), employer-provided benefits (including health insurance, retirement, and legally required benefits) cost $14.50 per hour on average. For 135 million full-time workers, that’s roughly $400–450 billion annually in health-related benefits just from the private sector. So, an additional $434 billion from the CCEs would roughly double the total employer-provided health and welfare investment in the U.S. economy. Here’s what that means in real terms for workers, if distributed proportionally across the workforce:
| Type of benefit expansion | Approximate potential effect |
| Universal employer-paid health insurance | Could cover all uninsured full-time workers in the private sector (15–20 million people)[8],[9] |
| Full family coverage | Employers could upgrade single coverage to family coverage without cost-sharing |
| Paid sick and family leave | Could fund 10–12 weeks of paid family leave for all full-time workers |
| Retirement augmentation | Could increase 401(k) or pension contributions by 3–4% of wages across the board[10],[11] |
| Mental health & preventive care programs | Large-scale coverage for counseling, preventive screenings, and wellness programs[12],[13],[14],[15] |
9. Measurable social and economic outcomes. Econometric studies (OECD, RAND, Harvard Public Health) suggest: each 1% increase in employer-paid health coverage reduces household medical bankruptcy rates by about 0.5–0.6%, expanding paid leave correlates with lower turnover (−10–15%) and higher labor force participation (especially among women), and better preventive care reduces total health expenditure by 5–10% over 5–10 years. If 20% of profits, $434B, went into these programs: the share of workers lacking employer coverage could drop from 10% to near zero, household out-of-pocket medical costs (currently $470B) could drop by 30–40%, worker retention and productivity could increase by 5–10% economy-wide. From a worker-level perspective, the distribution of $434B among 135M full-time workers would cover full family health premiums for lower-wage workers, provide paid leave, or supplement retirement and disability programs. If the CCEs devoted 20% of their net profits to the Benefits Fund, we would expect the following results:
| Impact dimension | Expected result |
| Economic | $434 billion per year in new benefits spending |
| Worker impact | $3,000+ per worker in additional support |
| Health impact | Virtually universal employer-based health coverage |
| Macroeconomic | Higher productivity, lower turnover, stronger household balance sheets |
| Long-term | Lower public health burden, greater labor force stability, improved well-being |
This could move U.S. employment standards from the current patchwork system to near-Nordic levels of worker welfare and security, without taxation or redistribution purely through internal profit allocation.
10. Determining the Effect of Increasing the Social Benefits Funds to 25%. According to the 2025 BEA/FRED data, after-tax profits of U.S. non-financial corporations annually was $2.17T. At 20%, the social-benefits fund would be $434B. At 25%, it becomes $542 billion, an increase of $108 billion per year. That’s an extra 25% boost to the benefit pool. The extra 5% could buy:
| Benefit category | Added $108B could finance… | Net effect |
| Health coverage expansion | Free full-family plans for all lower-income full-time workers | Near-universal private coverage |
| Paid family & medical leave | 8–10 weeks fully paid leave for every worker | Major gain in work-life balance |
| Retirement & disability | +1% of wages in employer contributions nationwide | 10–15 % higher retirement balances after 25 yrs |
| Childcare & education credits | Subsidized childcare or tuition for 15M families | Increased female labor participation |
| Mental health & preventive care | Universal access programs at workplaces | Lower absenteeism, higher productivity |
11. Estimated Economic and Social Outcomes. If the CCEs Social Benefits Funds were increased to 25% of net profits, we would estimate the following compared to the status quo: the average value of employer benefits package would increase 17%, uninsured full-time workers would be eliminated, worker out-of-pocket household medical costs would be reduced by 40-50%, worker turnover would be reduced by 15-20%, and labor force participation (especially women) would increase by 3%. Of particular note, the marginal gain from raising the Social Benefits Funs allocation by 5 percentage points (very large at the household level but smaller at the macro level once near-universal coverage has been achieved. In summary, Social Benefits Funds receiving a 25 % allocation would cement Nordic-like benefits, including universal health coverage and paid leave, boost household disposable income by 5%, cut turnover and medical debt further, and still leave half of all profits, approximately $1 trillion for CCE reinvestment and expansion.