Definition - What does Mutualization mean?

Mutualization is a process in which a standard business reorganizes itself such that its members become part owners, hold the majority of the company stocks, and receive dividends from the company's profits as part of their compensation.

Once mutualization takes place, the members also become clients of the organization. The restructuring is an incentive for them to patronize the business even more.

Once a company undergoes mutualization, it becomes known as a mutual company or a cooperative.

Insuranceopedia explains Mutualization

After each calendar year, the members of the cooperative receive dividends from the company's profits.

In addition to these earnings, the members of a mutual company also have the power to elect its leaders, including the company's board of directors.

Insurance companies can be or become mutual companies. In these cases, the policyholders may receive dividends and have a say in who will lead the company.

The reverse process, by which a cooperative becomes a standard business, is known as privatization, demutualization, or stocking the company.

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