Competition Mode Question
In most corporations the salaries of executives are set by a group from the corporation’s board of directors. Since the board’s primary mission is to safeguard the economic health of the corporation rather than to make its executives rich, this way of setting executives salaries is expected to prevent excessively large salaries. But, clearly, this expectation is based on poor reasoning. After all, most members of a corporation’s board are themselves executives of some corporation and can expect to benefit from setting generous benchmarks for executives salaries.
The point made by the author is that the most common way of setting executives salaries might not keep those salaries in bounds because
(A) most corporals executives, thanks to their generous salaries, are not financially dependent on money earned as board members
(B) most corporals executives might be less generous in setting their own salaries than the board members actually setting them are
(C) many board members might let their self-interest as executives interfere with properly discharging their role as board members in setting executives salaries
(D) many board members who set executives salaries unreasonably high do so because they happen to be on the board of a corporation of which they expect later to become executives
(E) many board members are remunerated generously and wish to protect this source of income by pleasing the executives to whom they owe their appointments on the board
[c] however, the board also stands to benefit from setting wages, thus poor reasoning.