Changing organizational form: demutualization and the privatization of communal wealth – Australian credit union experiences

Recent decades have seen substantial demutualization of financial institutions around the world, involving the conversion of accumulated communally owned wealth into private wealth. Whether driven by a quest for a more efficient organizational structure or by wealth expropriation incentives, different methods of demutualization have different implications for wealth allocation among current members and transfers of wealth to outsiders. While credit union sectors internationally have, to date, experienced few demutualizations, there are increasing incentives for such organizational change. Three alternative demutualization strategies (share issue to members plus an external capital raising, liquidation and cash distribution to members (a quasi-demutualization), and merger with a listed company) recently used by Australian credit unions are analysed to highlight wealth implications, survival risks for the mutual form and potential problems arising in the demutualization process.