Business management · 2003 · November · Paper 2 · HL · Markscheme

MARKSCHEME November 2003 BUSINESS AND MANAGEMENT Higher Level Paper 2 20 pages N03/370/H(2)M+ INTERNATIONAL BACCALAUREATE BACCALAURÉAT INTERNATIONAL BACHILLERATO INTERNACIONALc [4 marks] 1. (a) Explain how socially responsib le investors can exert power over executives and company policy at an annual general meeting. In AGM shareholders are invited to: y vote on resolutions and the re-election / election of a board of directors y have opportunities to ask the CEO, directors, chairperson questions y approve the year’s accounts. Given the above, socially res ponsible investors can more than just engage in dialogue with the company. They potentially can: y draw attention to unacceptable practices and suggest new practices y vote against proposed policies / objectives / resolutions that are perceived as being socially irresponsible y vote against the current board of directors and replace them. [3 to 4 marks] For a relevant discussion of at least two options from above. The discussion has to refer to the AGM role. [1 to 2 marks] For a limited discussion with no reference to AGM role. [5 marks] (b) Analyse two advantages and two disadvantages for investment trusts which decide to invest in a socially responsible manner. The possible advantages may include: y in the longer term, socially responsible companies can become more profitable – and give a higher return for the investors y USP for the investment funds. May a ttract the growing number of socially responsible investors. More funds result in more power for the investment trusts y fund managers may be perceived as trustworthy by the investors. The possible disadvantages may include: y lower salary for the fund managers y greater selectivity in choosing the comp anies in which to invest may result in choosing socially responsible companies that make lower le vels of profit and, consequently, lower dividends for the share holders. This is more of a short-term consequence y costs of administration and involvement may be higher due to active shareholding y more limited sources of funds, as profit-seeking investors may not come forward. [4 to 5 marks] For a clear analysis of two advantages and two disadvantages. [2