Editing Mutual organization (section)

== 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.

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.