The virtuous circle of mutuality
A Yorkshire Building Society case study

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Page 4: The important difference

The key difference between a mutual and a PLC is that in a mutual each voting member has only one vote, whereas in a PLC the number of votes people and organisations have depends on the number of shares that they have in that organisation. If a large institution such as a Pension Fund has millions of shares in a company then it will have more votes on its own than the thousands of small shareholders. The other major difference is that the mutual exists to serve its members interests, rather than simply to make a profit by providing goods and services to customers.

In the UK today, there are all types of mutual organisations which set out to serve their members interests e.g. service organisations like the Rotary and Inner Wheel, sports and social clubs such as athletics and tennis clubs, and some major national organisations like the Automobile Association.

The AA, for example, exists for the mutual benefit of motorists who pay an annual subscription which will provide them with help and support should their vehicle break down, provide them with information about travel routes, weather conditions, etc.

In the course of time these mutuals build up assets which are used to meet their objectives e.g. the AA has a network of breakdown phones, together with a fleet of vehicles, buildings and offices. These assets are essential to the ongoing well being of members. It would be foolhardy to sell these assets off to make a quick profit. These mutuals are usually set up in 'perpetuity' which means that they will exist forever or as long as their members have needs to be met.

The members of a mutual choose a Board of Directors to represent their interests and to give the organisation direction on behalf of members. We can summarise some of these differences in the form of a chart:

Yorkshire Building Society | The virtuous circle of mutuality