- CFA Exams
- CFA Level I Exam
- Topic 5. Equity Investments
- Learning Module 4. Overview of Equity Securities
- Subject 3. Private versus Public Equity Securities
CFA Practice Question
Which one is more likely to offer incentives to motivate managers to "behave like owners"?
B. Public equity
C. Bond
A. Private equity
B. Public equity
C. Bond
Correct Answer: A
Having the right people in place is critical to success. PE investors retain senior managers capable of driving value growth and replace those not up to the task. Incentives between investors and management are fully aligned.
User Contributed Comments 2
| User | Comment |
|---|---|
| johntan1979 | B does the same thing too, but I guess in terms of the level, A > B |
| dbedford | I am aware of companies that award what I call private shares to executives, that tend to pay out a good deal and then are redeemed and given back to the company at the end of the year and re awarded for current year performance and the cycle continues. |