CFA Practice Question

There are 233 practice questions for this study session.

CFA Practice Question

Select the incorrect statement(s) regarding good corporate governance practices.

I. Board members cannot have any material relationship with the company other than as board members or shareholders of the company.
II. Board members cannot use company assets.
III. If a shareholder-approved proposal is not binding, the company does not have to implement it.
A. I and II
B. I and III
C. I, II and III
Explanation: I. Independent board members cannot have any material relationship with the company other than as a board members or shareholders.
II. Board members cannot use company assets for personal use.
III is true. However, this would be a sign of weak corporate governance.

User Contributed Comments 10

User Comment
Misah It is a hard one. You need to read it closely
nick1981 The question is misleading or even wrong, it asks for INCORRECT statements but actually all three of them are CORRECT. Am I right or did I get it wrong here? Isn´t it correct for example that company´s assets shouldn´t be used personaly??
addidas The question is right. All statements are wrong as explained.
julescruis Yes it is misleading but correct. Watch out for key words, board members can be from management, assets can be used by board members (those who are not independant for instance) and third is sign of weak corporate governance as stated. tricky one...
Adkins08 I Executives of firm are normally members of board, so only INDEPENDENT board members may not have material relationship with firm.
II Board can use company assets to hire independent consultants, etc.
III IMO this one is fine for me, but apparently it's a sign of weak governance
DarkOblivion000 Wow so tricky...
dipu617 This question was meant to trick us!! :-)
PeterL How can it say that #3 is true and yet is incorrect nonetheless?
endurance this is pure level 1 style......but a good question
LyncKidd Peter, the question asks which are good governance practices. Good is a poor use in this question. If the question were reworded to say strong it would make more sense and be more consistent with the curriculum.
You need to log in first to add your comment.