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A mutual organization (or society) is an organization (which is often, but not always, a company or business) based on the principle of mutuality. Unlike a true cooperative, members usually do not contribute to the capital of the company by direct investment, but derive their right to profits and votes through their customer relationship. A mutual organization or society is often simply referred to as a mutual. A mutual exists with the purpose of raising funds (or money), 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 shareholders to pay in the form of dividends, and as such does not usually seek to maximise and make large profits or capital gains. Mutuals exist for the members to benefit from the services they provide. Profits made will usually be re-invested in the mutual for the benefit of the members, although some profit may also be necessary in the case of mutuals to sustain or grow the organization, and to make sure it remains safe and secure.
Modern mutuality Various types of financial institutions around the world are mutuals, and examples include: Modern mutual financial institutions usually offer services very similar (if not the same) to those of a bank, except a mutual may pay higher interest rates on savings and deposit accounts, charge lower interest rates on mortgages and loans, have fewer or lower fees and charges on the services or products it offers, and the members who save and borrow with the mutual ultimately own the business. Conversion A mutual may convert itself to a non-mutual through the process of demutualization. This process became increasingly common in the 1980s as a result of "Thatcherite" policies and ideology. | ||||||||
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