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April 2011, Q20 (iii)

A

AKS01

Very Active Member
Hi,

The examiners report to this question says
"A director will probably have only one principal employer and will, therefore, be motivated more by total risk".

I understand that a director cannot diversify their portfolio like a shareholder can and are therefore exposed to the specific risks of the project more. But I am unsure what this sentence means.
 
Hi

I'm not sure there's much more to understand! :)

I think you've explained the examines report quote pretty well in your next sentence, ie because a director probably has only one principal employer (ie cannot diversify like a shareholder) they take into account total risk (ie both systematic and specific).
 
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