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Hi aaba,

Another great question! Let's break down each answer to figure out which is the best answer.

First, let's get rid of any answers that use vague pronouns. The two that jumped out right away were A & B:

(A) it was believed by the employee that she had won a moral victory
This answer uses passive voice, which the GMAT discourages whenever possible. It's also not clear if the employee herself won, or if the employee believes some other woman won. Therefore we can rule this out as INCORRECT.

(B) she believed that she had won a moral victory
By using the pronoun "she" twice, it's unclear if this phrase is talking about one woman or two. Which "she" is the employee? The one who believes a victory was won, the one who actually won, or are they both referring to the same woman? Since the pronouns are unclear, this one is INCORRECT.

Now that we've narrowed down the answers to C, D, & E, let's look at whether or not each answer conveys the right meaning:

(C) the employee believed that she had won a moral victory
This is the CORRECT answer because it's the clearest and least wordy. We can easily see that the employee believed she herself won.

(D) the employee believed her moral victory to have been won
This is INCORRECT because it suggests that someone else won her victory for her - to have been won by WHOM?

(E) the employee believed that the moral victory was won
Again, this is INCORRECT because it suggests that the victory was won by some other person, not the employee herself.