Conflict of interest CI

CFA Level I
#1

Which of the following best represents the potential for misaligned interests between shareholders and board directors when director tenures are excessively long?

  1. Entrenchment
  2. Empire building
  3. Excessive risk taking

ANSWER: A
How not empire building, manager compensation tied to company size creates incentives for empire building through acquisions

#2

Managers aren’t directors.

#3

what is entrenchment

#4

2024 Level I CFA curriculum, volume 2, p. 191.

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#5

“Conflict of interest (CI) can be a serious issue. It’s important to identify and address any potential conflicts to ensure fairness and transparency in decision-making.”