An entity, other than an investor-owned entity, that provides dividends, lower costs or other economic benefits directly to its owners, members or participants. For example, a mutual insurance company, a credit union and a co-operative entity are all mutual entities.
A mutual company is a private firm that is owned by its customers or policyholders. The company’s customers are also its owners. As such, they are entitled to receive a share of the profits generated by the mutual company.
The distribution of profits is typically made in the form of dividends paid on a pro rata basis, based on the amount of business each customer conducts with the mutual company. Alternately, some mutual companies choose to use their profits to reduce members’ premiums.
A mutual company is sometimes referred to as a cooperative.
A cooperative (also known as co-operative, co-op, or coop) is “an autonomous association of persons united voluntarily to meet their common economic, social, and cultural needs and aspirations through a jointly-owned and democratically-controlled enterprise”. Cooperatives may include:
- businesses owned and managed by the people who use their services (a consumer cooperative)
- organizations managed by the people who work there (worker cooperatives)
- multi-stakeholder or hybrid cooperatives that share ownership between different stakeholder groups. For example, care cooperatives where ownership is shared between both care-givers and receivers. Stakeholders might also include non-profits or investors.
- second- and third-tier cooperatives whose members are other cooperatives
- platform cooperatives that use a cooperatively owned and governed website, mobile app or a protocol to facilitate the sale of goods and services.
Research published by the Worldwatch Institute found that in 2012 approximately one billion people in 96 countries had become members of at least one cooperative. The turnover of the largest three hundred cooperatives in the world reached $2.2 trillion.
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