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((redirect|Mutuals|other uses|Mutual (disambiguation)))
((Short description|Organization based on mutual benefit))((Refimprove|date=December 2009))

A '''mutual organization''', also '''mutual society''' or simply '''mutual''', is an [[organization]] (which is often, but not always, a [[company (law)|company]] or [[business]]) based on the principle of mutuality and governed by private law. Unlike a [[cooperative]], members usually do not directly contribute to the [[Capital (economics)|capital]] of the organization, but derive their right to profits and votes through their [[customer]] relationship.

A mutual exists with the purpose of raising [[funding|funds]] from its membership or customers (collectively called its ''members''), which can then be used to provide common services to all members of the organization or society. A mutual is therefore owned by, and run for the benefit of, its members – it has no external [[shareholder]]s to pay in the form of [[dividend]]s, and as such does not usually seek to maximize and make large [[Profit (accounting)|profits]] or [[capital gain]]s. Mutuals exist for the members to benefit from the services they provide and often do not pay [[income tax]].<ref>Simpson, Steven D. ''Multistate Guide to Regulation and Taxation of Nonprofits.'' CCH, 2005. Print. ((ISBN|978-0-8080-8930-8)).</ref>

Surplus revenue made will usually be re-invested in the mutual to sustain or grow the organization, though some mutuals operate a [[dividend]] scheme similar to a cooperative.<ref>((Cite web |title=Nationwide Fairer Share ((!)) Nationwide |url=https://www.nationwide.co.uk/about-us/fairer-share/ |access-date=2024-03-17 |website=www.nationwide.co.uk))</ref>

== Background ==
The primary form of financial business set up as a mutual company in the [[United States]] has been [[mutual insurance]].  Some insurance companies are set up as stock companies and then mutualized, their ownership passing to their policy owners.  In mutual insurance companies, what would have been [[Profit (accounting)|profits]] are instead rebated to the clients in the form of [[dividend]] distributions, reduced future premiums or paid up additions to the policy value.

This is a competitive advantage to such companies—the idea of owning a piece of the company could be more attractive to some potential clients than the idea of being a source of profits for investors. In the typical stock company, profits go to shareholders. In contrast, a mutual manages the company in the best interests of the customers.  Furthermore, a mutual company is able to focus on a longer horizon than a typical company. Some mutual insurance companies make this claim explicitly.<ref>((cite web|title=Mutuality|url=http://www.northwesternmutual.com/about-northwestern-mutual/our-company/company-overview.aspx#Mutuality|work=Company Overview|access-date=19 August 2012))</ref>

In more general terms, mutual organizations are able to minimize the [[principal–agent problem]] by removing one stakeholder, the investor-owner, in favor of one of the other stakeholders, usually the customer, who becomes both user and joint owner of the business.<ref>((cite book |last=Birchall |first=Johnston |title=The New Mutualism in Public Policy |publisher=Psychology Press |year=2001 |isbn=0415241308 |pages=272 |author-link=Johnston Birchall))</ref>

However, the mutual form of ownership also has disadvantages.  One example is that mutual companies have no shares to sell and hence no access to [[equity market]]s.

At one time,((When|date=August 2022)) most major U.S. life insurers were mutual companies. For many years, the tax status of such organizations was open to dispute, as they were technically [[nonprofit]] organizations. Eventually,((When|date=August 2022)) it was agreed that federal taxation would be based on their share of business: for instance, in years in which mutual companies represented half of the business, they would be responsible for half of the taxes paid by the industry.

Many [[savings and loan association]]s were also mutual companies, owned by their depositors.

As a form of corporate ownership the mutual has fallen out of favor in the U.S. since the 1980s. Savings and loan industry [[deregulation]] and the late 1980s [[savings and loan crisis]] led many to change to stock ownership, or in some cases into [[bank]]s. Many large U.S.-based insurance companies, such as the [[Prudential Financial, Inc.|Prudential Insurance Company of America]] and the [[Metropolitan Life Insurance Company]] have [[demutualization|''demutualized'']], with shares of stock being distributed to their policyholders to represent the ownership interest they formerly had in the form of their interest as mutual policyholders.

The [[Mutual of Omaha]] Insurance Company has also investigated demutualization, even though its form of ownership is embedded in its name. It is noted that other formerly mutual companies such as [[Washington Mutual]], a former [[savings and loan association]], have been allowed to demutualize and yet retain their names.

The approximate [[United Kingdom|British]] equivalent of the savings and loan is the [[building society]]. Building societies also went through an era of demutualisation in the 1980s and 1990s, leaving only one large national building society and around forty smaller regional and local ones. Significant [[demutualisation]] also occurred in Australia and South Africa in the same era.

[[Cooperatives]] are very similar to mutual companies. They tend to deal in primarily tangible goods and services such as agricultural commodities or utilities rather than intangible products such as [[financial services]]. Nevertheless, banking institutions with close ties to the co-operative movement are usually known as [[credit union]]s or [[cooperative banking|cooperative banks]] rather than mutuals.

== Modern mutuality ==
Various types of [[financial institution]]s around the world are mutuals, and examples include:
* Mutual [[Building society|building societies]]
** [[Nationwide Building Society]] – United Kingdom
** [[Coventry Building Society]] – United Kingdom
** [[Nelson Building Society]] – New Zealand
* Mutual [[Bank|banks]] and [[mutual savings bank]]s
** [[Greater Bank]] – Australia
** [[SBS Bank]] – New Zealand
* Mutual healthcare providers
** [[Benenden Healthcare Society]] – United Kingdom
* [[Mutual insurance]] companies
** [[Shepherds Friendly Society]] – United Kingdom
** [[Protection and indemnity insurance]]

Some mutual financial institutions offer services very similar to (if not the same as) those of a [[commercial bank]]. In some markets, mutuals offer very competitive [[interest rate]]s and fee tariffs on [[savings account|savings]] and [[deposit account]]s, [[mortgages]] and [[loans]]. The members who save and borrow with the mutual ultimately own the business.

== Conversion ==
'''Mutualization''' or '''mutualisation''' is the process by which a [[joint stock company]] changes legal form to a mutual organization or a [[cooperative]], so that the majority of the stock is [[Employee ownership|owned by employees]] or customers.<ref>[http://www.thefreedictionary.com/mutualization]. Dictionary.com</ref> 

'''[[Demutualization]]''' or '''demutualisation''' is the reverse process, whereby a mutual may convert itself to a joint-stock company. This process became increasingly common in the 1980s as a result of deregulation. In the United States, conversion may be full, to a [[public company]], or in many states, partial, to a mutual [[holding company]].

==See also==
* [[Consumer cooperative]]
* [[Cooperative]]
* [[Corporatization]]
* [[Employee ownership]]
* [[Market socialism]]
* [[Mutualism (economic theory)]]
* [[Mutualism (movement)]]
* [[Producer cooperative]]

==References==
((reflist))

== External links ==
* [https://web.archive.org/web/20080906174719/http://www.swissre.com/pws/research%20publications/sigma%20ins.%20research/are%20mutuals%20an%20endangered%20species.html Are mutuals an endangered species?] — Swiss RE article on the result of demutualization activity.
* [https://web.archive.org/web/20181126092704/http://www.swissre.com/library/042016_Mutual_insurance_in_the_21st_century_back_to_the_future.html Mutual insurance in the 21st century: back to the future?] – Swiss RE
* [https://publications.parliament.uk/pa/cm200001/cmselect/cmtreasy/272/272ap06.htm Report on the near collapse of the Equitable Life Assurance Society] (Commissioned by the UK House of Commons, 2001)

((Co-operatives))
((Insurance))

[[Category:Mutual organizations| ]]

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