Ot Exam Answer

Topics: Stock market, Privately held company, Stock Pages: 2 (627 words) Published: March 2, 2013
OT exam answers for Part B.

Ques 2: In what ways might the ownership structure of a corporation impact on organizational decision-making?

A corporation is a body that is granted a character recognising it as a separate legal entity, having its own rights, privileges and liabilities distinct separate from its members. There are mainly 2 different categories of ownership structure. A corporate can either be privately or publically owned.

A private organisation is privately owned by a small number of individuals or family members. The main advantage is that private organisations are not directly tied to the stock market or public shareholders. Therefore the owners of the organisation can have total control and ‘freedom’ to make their own decisions. As their main purpose may not be solely for making profits, thus they can make certain decisions that are ethical or beneficial to the environment. But the downside is that it is more difficult for such organisation to raise huge amount of capital to fund new projects, as compared to public corporations. Thus this may cause a loss of additional profits from the new projects. One example so such a company would be a local family run catering business.

The ownership of a public organisation, on the other hand, is owned by the public who has ownership shares and they are freely exchanged and traded in the public share markets. Shareholders of the public organisation mainly expect financial returns only. Therefore public organisations have to make their stock appealing to their shareholders, both current and potential. Most of the shares of the public organisation are owned by professionally managed mutual funds, insurance companies and investment institutions. The shareholders then elect a board of directors who appoint and oversee the management of the company. Shareholders have little involvement with the day to day operations of the company. The main advantages of a public company are that they have the...
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