- CFA Exams
- CFA Level I Exam
- Topic 3. Corporate Issuers
- Learning Module 3. Corporate Governance: Conflicts, Mechanisms, Risks, and Benefits
- Subject 2. Corporate Governance Mechanisms
CFA Practice Question
If a board member leases a company airplane for free personal use, it is an indication of ______.
A. related-party transactions
B. personal use of company assets
C. inappropriate executive compensation
Explanation: On the other hand, if a board member leases his or her own airplane to the company, it will be considered a related-party transaction.
User Contributed Comments 9
| User | Comment |
|---|---|
| ThePessimist | The question says "free personal use," implying that the Board Member isn't paying for this "lease." So it's not really a transaction at all, is it? |
| volkovv | it means that the Board member is taking it as an excessive perquisite, which is a sign of personal use of company's assets |
| jamyandy | Personal use of the company's resources is not necessarily a breach of policy. What if the use of the jet was incorporated in the Executive's compensation package? |
| sheenalim | what if the personal use of the asset wasn't free? |
| MUTE | If it is not free, it will be called rental, not "use" which implies free. |
| Joel1980 | Can you lease something for free? |
| dream007 | @ Joel...He leases the plane implies he leased it on behalf of the company so that he can use it for his own personal use (free personal use). |
| gill15 | You're making it complicated. You cant use anything from work for personal use and it doesnt matter if you pay for it. |
| 111hal111 | Surely this is an EXAMPLE of personal use of company assets, not an indication and rather it is an INDICATION of C |