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# In most corporations the salaries of executives are set by a

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VP
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In most corporations the salaries of executives are set by a [#permalink]

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14 Mar 2005, 01:37
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0% (00:00) correct 100% (05:24) wrong based on 5 sessions

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In most corporations the salaries of executives are set by a group from the corporationâ€™s board of directors. Since the boardâ€™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 corporationâ€™s board are themselves executives of some corporation and can expect to benefit from setting generous benchmarks for executives salaries.

Which one of the following practices is vulnerable to a line of criticism most parallel to that used in the argument in the passage?

(A) in medical malpractice suits, giving physicians not directly involved in a suit a major role in determining the damages due to successful plaintiffs

(B) in a legislature, allowing the legislators to increase their own salaries only if at least two-thirds of them vote in favor of an increase

(C) to work both fast and accurately by paying them by the piece but counting only pieces of acceptable quality

(D) in a sports competition decided by judgesâ€™ scores, selecting the judges from among people retired from that sport after successful careers

(E) in a business organization, distributing a group bonus among the members of a task force on the basis of a confidential evaluation by each member of the contribution made by each of the others

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GMAT Club Legend
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14 Mar 2005, 10:20
I'll go with (B). If legislators can increase their own salaries if 2/3s of them vote in favor to an increase, then the system is falwed since legislators would naturally vote in favor since they can expxect to benefit from the decision.

(A) - does not provide tangible benefits to the physician who determined the damage
(C) - does not provide tangible benefits to the person paying (by paying for only peices of acceptable quality)
(D) - does not provide tangible benefits for ex-sportsmen/sportswomen
(E) - same thing

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VP
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14 Mar 2005, 10:49
E) ! the line of reasonig is more similiar, because each member benefits indirect, as it is the argument.

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14 Mar 2005, 11:03
The only difference between B and E is the nature of how they benefit. B has a direct relationship, while E has an indirect relationship, as Christoph points out.
I read the passage as the executives benefiting directly if they set generous benchmark. So I chose B. I'll stick with this choice for the moment.

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Director
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14 Mar 2005, 11:22
notice the word "board are themselves executives of some corporation" that rules out B. Stick with A
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14 Mar 2005, 11:25
praveen_rao7 wrote:
notice the word "board are themselves executives of some corporation" that rules out B. Stick with A

A does not give any tangible benefits to the physicians determining the damage. What do they stand to gain ?

In the passage, the executives stood to gain very big benefit - a big pay cheque

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14 Mar 2005, 11:26
Seems E is a better choice although i'll stick with my answer choice (B) for the time being

Last edited by ywilfred on 14 Mar 2005, 11:36, edited 1 time in total.

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14 Mar 2005, 11:35
Seems E is a better choice, although i will stick with my answer (B) for the time being

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SVP
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14 Mar 2005, 12:07
I believe it is (E).

The rule is simple. You scratch my back and I will scratch yours.

By the way you all folks might endup in this situation after getting MBA from big schools.

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14 Mar 2005, 12:24
E's problem is that there's only this much money to be divided among us. If I scratch your back by giving your more, that would mean I get less.

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Director
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14 Mar 2005, 15:04
A helps doctors set precedence, which in turn apply to all the doctors. What is the OA. This is really a good question.
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Praveen

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14 Mar 2005, 15:47
praveen_rao7 wrote:
A helps doctors set precedence, which in turn apply to all the doctors.

Yes, that does make sense. I change my mind to A.

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14 Mar 2005, 17:06
i say A because the statement sets up a situation where a judicial/advisory body is non-independent. The only case in the answers that has this situation is A even if it is flawed because the bias is different.

We would assume that doctors would give winning plaintiffs crummy rewards whereas chummy directors would give their colleagues good salary packages - but the underlying situation is the same.

What if we said that instead of doctors it was victims of malpractice. it would mirror more closely but...i say the underlying situation exists in both cases.

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14 Mar 2005, 18:12
HongHu wrote:
praveen_rao7 wrote:
A helps doctors set precedence, which in turn apply to all the doctors.

Yes, that does make sense. I change my mind to A.

but what does the precedence do ? It doesn't help the doctor deciding the damage to get any benefit. If I'm a doctor and I'm asked to rule on a malpractice and I say, 'hey, that doctor did not make a bad decision, it's just pure misfortune on the patient's part (even if I knew that doctor probably bombed the surgery)', what do i get? I don't get paid extra money to say that...

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VP
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14 Mar 2005, 19:19
Thanks

OA is A.

praveen did the good job.

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VP
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14 Mar 2005, 19:34
ywilfred wrote:
HongHu wrote:
praveen_rao7 wrote:
A helps doctors set precedence, which in turn apply to all the doctors.

Yes, that does make sense. I change my mind to A.

but what does the precedence do ? It doesn't help the doctor deciding the damage to get any benefit. If I'm a doctor and I'm asked to rule on a malpractice and I say, 'hey, that doctor did not make a bad decision, it's just pure misfortune on the patient's part (even if I knew that doctor probably bombed the surgery)', what do i get? I don't get paid extra money to say that...

Hi,

that's means you set the generous benchmarks for all doctors. That's exactly benefit all doctors, isn't that?

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14 Mar 2005, 19:34
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# In most corporations the salaries of executives are set by a

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