Analyse the strengths and weaknesses of a 'public limited company' legal structure for business.

Mark scheme

Marking points from the official mark scheme (Feb/Mar 2017). The mark or mark type is shown in brackets.

1. [7-8] Good analysis of the strengths and weaknesses of 'public limited company'. Answers may well initially define a public limited company a company that can sell shares to the general public on a stock exchange and has limited liability. Identified and analysed advantages and disadvantages of this form of business organisation could include the following: Strengths: business has a separate legal identity; limited liability for shareholders; ability to raise large sums of capital - no limitation on number of shares; shares are freely transferable - providing liquidity for shareholders; provides prestige and status; increased opportunity to make acquisitions by offering shares; may find it easier and cheaper to borrow form banks; tax advantages vis a vis other organisation structures. Weaknesses: complex legal formalities to form a public limited company - costly and time consuming; strict controls and regulations to protect the interests of the ordinary shareholder; requirement to file accounts; the original owners may lose control; risk of takeover; financial markets will determine the value of the company through the trading of the shares; greater public scrutiny of company performance and activities; may lead to governance/management problems.
2. [5-6] Some analysis of the strengths and weaknesses of 'public limited company'.
3. [3-4] Some application of the strengths and weaknesses of 'public limited company'.
4. [1-2] Limited understanding of 'public limited company'.
5. [9-12] Effective evaluation of the influence of ethics on the decisions of private sector banks. Ethics is about the morality, rights and wrongs of business decisions as perceived by the stakeholders of a business. Business ethics are concerned with how businesses treat the environment, work with staff and suppliers to build a responsible company, relate to local communities and produce a viable, sustainable company and add value socially as well as economically. Business ethics is now part of the language of business; customers demand more and management is often trained to deliver more. May mean that a business makes explicit provision for ethical behaviour and ethical performance. Might mean additional costs. More monitoring and rules of accountability. May mean new and different practices. May be seen as part of brand building and reputational protection (USP). May be a source of additional investment for ethical investors. Becoming a necessity rather than a discretionary approach to business decisions. In relation to private sector banks, answers may address some of the following issues: Willingness of a bank to take risks – the level of discretion/freedom given to employees. The extent and significance of internal regulatory protocols that prevent unethical behaviour. Without ethical frameworks, expectations or codes, banks may engage in unethical behaviour – over-invest – focus on high profit making activities at the expense of core customer lending activities – engage in exploitative practices with small businesses – manipulate lending rates - engage in illegal activity. Ethical behaviour will constrain banks and move them into fair and reasonable behaviour and to adopt internal codes and regulations and so avoid need for external regulations, fines and even prison sentences. Answers may well refer to the banking crisis and crashes in recent times. Full credit to be given to such references.
6. [7-8] Limited evaluation of the influence of ethics on the decisions of private sector banks.
7. [3-6] Analysis and some application of the influence of ethics on the decisions of private sector banks.
8. [1-2] Understanding of ethics and/or banks.