Mutual Organisations and Cooperatives/Co-Ops

What are Mutuals, Mutual Organisation or Societies?

• An Organisation, Company or Business
• Based on principal of mutuality
• Not a True Cooperative
  • Members do not contribute to capital of company by direct investment
  • Derive right to profits and votes through customer relationship

Examples of Mutuals

What is a Co-Operative /Co-Op ?

• An autonomous association of people United voluntarily
• To meet common economic, social and cultural needs and aspirations
• Through a Jointly owned and democratically controlled Business
• Often related to the International Cooperative Alliance
• "a Jointly owned enterprise engaging in the production or distribution of goods or supplying of services, operated by its members for their mutual benefit, typically organised by consumers or farmers"
• Usually have social goals which they aim to accomplish by investing a proportion of trading profits back into communities.

Examples of Co-ops

• Non-profit Community Organisations and Businesses
• Consumer Cooperative: People who use the services of the co-op
• Worker Cooperative (Producer Cooperative):
  • People who work for the co-op, employees and/or owners. e.g. Indian Coffee House
• Non-monetary Cooperative
  • Provides service based on entirely voluntary labour in maintenance and provision of a particular service or good. e.g. library.
  • Usually Locally Owned and operated, provides free rental of equipment of all kinds.
  • Reduce general human consumption of goods, hence promotes sustainable development
• Retailer's Cooperative (Secondary or marketing cooperative)
  • Employs economies of scale on behalf of its members to receive discounts from manufacturers and to pool marketing. E.g. grocery stores, hardware stores, pharmacies.
• Volunteer Cooperative (Vountary association, lodge, social club)
  • Run by and for a network of volunteers
  • for benefit of defined membership or the public to achieve some goal.
• Housing Cooperative: People who live in same place
• Hybrid Coops: Worker coops that are also consumer coops or credit unions
• Multi-stakeholder cooperatives: e.g. those that bring together civil society and local actors to deliver community needs
• Second and Third Tier cooperatives whose members are other cooperatives
• Social Cooperative (Italian Social Cooperative)
  • Type A: Nring together providers and beneficiaries of a social service as members
  • Type B: Bring permanent workers and previously unemployed people who wish to integrate into the labour market

How does a Cooperative work?

• As Part of the Social Economy/ Social Enterprise
  • Traditionally Combine social benefit interests with capitalistic property-right interests
  • Achieve a mix of social and capital purposes by democratically governing distribution questions by and between equal controlling members
  • External social benefit is encouraged by incorporating operating-principle of cooperation between co-operatives
• Different from Other forms of Incorporation
  • Profit making or economic stability are balanced by interests of the community
• As a Legal Entity
  • As companies limited by shares, guarantee, partnerships
  • Unincorporated associations
  • Specific incorporation in Finland, Sweden and Australia:
  • Non-capital stock corporations in US
  • Industrial and provident society structure in the UK
• As a member of the International Cooperative Association (ICA)
  • Coop Principles and Values
  • Coop Marque and Domain
• Membership
  • is open, and anyone who satisfies certain non-discriminatory conditions may join.
• Economic Benefits
  • Distributed proportionally to each member's level of participation in the cooperative e.g. by a dividend on sales or purchases rather than capital invested

Benefits of Cooperatives

• More economically resilient than other forms of enterprise (twice number of co-ops 80% vs 41% surviving their first 5 years

How does a Mutual Work?

• Funds are raised from members (membership or customers) and are used to provide common services to all memebrs of the organisation or society
• Is owned by and run for the benefit of its members - no external share holders hence no need to maximise profits
• Profits are re-invested for mutual benefit of members, internal financing to sustain or grow the organisation
• Members to benefit from services they provide (sometimes no income tax)

Benefits of Mutuals

• Minimise Principal-agent problem by removing one stakeholder: The Investor-Owner
• No shareholders
  • Owning a piece of the company is more attractive to some potential clients that being a source of profits for investors
  • Able to focus on a longer horizon than typical company

Disadvantages of Mutuals

• No shares to sell and no access to equity markets