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The CEO declared that everyone had to work every day through the holidays to make the production deadline, but in calling for such an extreme measure, the company's employees were upset to the point of mutiny.
In the book it is given that Adverbial Modifiers modify anything but plain noun. But in this example the modifier "but in calling for such an extreme measure" is pointing to Noun-CEO. That is kind of contradicting? Can someone please explain this.
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"In calling for such an extreme measure" does not modify the noun "CEO." It should modify a verb.
For instance following would be correct.
The CEO erred in calling for such an extreme measure.
The following is correct as well.
In calling for such an extreme measure, the CEO erred.
In both of the above versions, "in calling for such an extreme measure" modifies the verb "erred."
However, in the example sentence you have presented, there's no verb for "in calling for such an extreme measure" to properly modify.
So, the sentence simply incorrect.
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But then, in the actual sentence "in calling for such an extreme measure" modifies the verb "declared", doesn't it ?
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