A mutual is a business owned by its customers, its employees, a group of like minded producers or a combination of these.
This section provides guidance on how different co-operatives and mutuals are defined, how they fit into the corporate landscape, the different legal structures used, and the governance systems operated.
Comparing corporate business purpose
- The purpose of a shareholder owned company is to reward owners who make risk investments, through profits and capital gain
- The purpose of a co-operative or mutual is to provide goods and services to its members, on an equitable basis
- The purpose of a charity is to deliver specific benefits, to a defined community
Defining a co-operative or mutual
- Every co-operative or mutual has a business purpose that seeks to achieve equitable outcomes for its members
- This means that a basic principle is that no member can benefit more than is fair – so benefits are either universal, or tied proportionately to business transactions
- Co-operatives and mutuals constitute themselves in ways that ensure this outcome
- In some parts of the world, co-operatives and mutuals have bespoke legal structures that only they can use
- Co-operatives are recognised in the constitution documents of some countries
- In many others, they adapt and use ordinary company legal systems
- In order to maintain equity, all co-operatives and mutuals choose a constitution that operates on the basis of one member one vote (OMOV) governance
- Governance can either be direct, with all economic participants qualifying as members, or indirect, with proxy representation of stakeholder interests
- The level of active engagement by members will depend on the type of co-operative or mutual and the level of engagement required
To read more about what makes co-operatives and mutuals a special type of business, download further information here.