- CFA Exams
- CFA Level I Exam
- Topic 3. Corporate Issuers
- Learning Module 2. Investors and Other Stakeholders
- Subject 3. Corporate ESG Considerations
CFA Practice Question
Which statement is true?
A. Creditors do not have any control over a company's operations.
B. Media attention can motivate politicians and regulators to introduce corporate governance reforms or enforce laws that protect stakeholders and society at large.
C. Results from the identification and analysis of ESG factors are not quantifiable.
Explanation: Statement A is false. Creditors can exert some control over a company by using covenants. For example, negative or restrictive covenants forbid a company from undertaking certain activities, and positive or affirmative covenants require the issuer to meet specific requirements.
Statement B is true. The media can affect corporate governance and influence stakeholder relationships through its ability to spread information quickly and shape public opinion.
Statement C is false. Refinements in the identification and analysis of such factors have resulted in information that is increasingly quantifiable in the investment process.
User Contributed Comments 1
| User | Comment |
|---|---|
| oshunt | Good explanation! |