(a) Define the term limited liability [4 marks] (b) Explain any four problems of statutory public corporations in your country [16 marks]

Answer Details

(a) Limited liability means that the liability (financial responsibility) of an owner for the debts of a business is limited to the amount he has invested or agreed to contribute. If the business fails, the owner can lose only his investment; his personal property cannot be seized to settle the business's debts.

(b) Four problems of statutory public corporations:

1. Inefficiency and mismanagement: because they are government owned and not driven by profit, many corporations are poorly managed, wasteful and produce low-quality services.
2. Political interference: appointments and decisions are often influenced by politicians rather than by ability and sound business judgement, which lowers efficiency.
3. Financial losses and dependence on subsidies: many corporations run at a loss and depend on government subsidies, becoming a drain on public funds.
4. Corruption: weak accountability encourages fraud, embezzlement and misuse of the corporation's resources by officials.

(Other acceptable problems: bureaucratic red tape and slow decision-making, and the tendency toward monopoly, which removes the pressure to be efficient.)