CFA Level I · CFA Level I Exam · Investors and Other Stakeholders
A controlling family holds 60% of a company's voting shares through a dual-class structure but only 20% of its economic interest. The family arranges for the company to buy supplies from a family-owned supplier at above-market prices. Which conflict does this most likely illustrate?
This illustrates a conflict between controlling and minority shareholders. The family's voting power exceeds its economic ownership, and overpriced related-party purchases transfer value to the family while minority shareholders bear most of the cost.
- AConflict between employees and managers
- BConflict between controlling and minority shareholdersCorrect
- CConflict between bondholders and managers over dividend policy
Explanation
The family controls votes beyond its economic stake and diverts value to itself via related-party dealings, at the expense of minority shareholders who bear most of the cost. No employee or bondholder dividend conflict is described.
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