GMAT Question of the Day: Daily via email | Daily via Instagram New to GMAT Club? Watch this Video

 It is currently 29 Jan 2020, 06:40

### GMAT Club Daily Prep

#### Thank you for using the timer - this advanced tool can estimate your performance and suggest more practice questions. We have subscribed you to Daily Prep Questions via email.

Customized
for You

we will pick new questions that match your level based on your Timer History

Track

every week, we’ll send you an estimated GMAT score based on your performance

Practice
Pays

we will pick new questions that match your level based on your Timer History

# Many people complain about corporations, but there are also those whos

 new topic post reply Question banks Downloads My Bookmarks Reviews Important topics
Author Message
TAGS:

### Hide Tags

Senior RC Moderator
Joined: 02 Nov 2016
Posts: 4942
GPA: 3.39
Many people complain about corporations, but there are also those whos  [#permalink]

### Show Tags

03 Dec 2019, 09:27
1
Question 1
00:00

based on 75 sessions

52% (03:27) correct 48% (03:28) wrong

### HideShow timer Statistics

Question 2
00:00

based on 90 sessions

86% (00:54) correct 14% (01:12) wrong

### HideShow timer Statistics

Question 3
00:00

based on 92 sessions

46% (01:24) correct 54% (01:10) wrong

### HideShow timer Statistics

Question 4
00:00

based on 88 sessions

61% (01:15) correct 39% (01:12) wrong

### HideShow timer Statistics

Question 5
00:00

based on 82 sessions

55% (00:33) correct 45% (00:32) wrong

### HideShow timer Statistics

New Project RC Butler 2019 - Practice 2 RC Passages Everyday
Passage # 483, Date: 30-Nov-2019
This post is a part of New Project RC Butler 2019. Click here for Details

Many people complain about corporations, but
there are also those whose criticism goes further and
who hold corporations morally to blame for many of
the problems in Western society. Their criticism is not
(5) reserved solely for fraudulent or illegal business
activities, but extends to the basic corporate practice of
making decisions based on what will maximize profits
without regard to whether such decisions will
contribute to the public good. Others, mainly
(10) economists, have responded that this criticism is
flawed because it inappropriately applies ethical
principles to economic relationships.

It is only by extension that we attribute the quality
of morality to corporations, for corporations are not
(15) persons. Corporate responsibility is an aggregation of
the responsibilities of those persons employed by the
corporation when they act in and on behalf of the
corporation. Some corporations are owner operated,
but in many corporations and in most larger ones there
(20) is a syndicate of owners to whom the chief executive
officer, or CEO, who runs the corporation is said to
have a fiduciary obligation.

The economists argue that a CEO’s sole
responsibility is to the owners, whose primary interest,
(25) except in charitable institutions, is the protection of
their profits. CEOs are bound, as a condition of their
employment, to seek a profit for the owners. But
suppose a noncharitable organization is owner
operated, or, for some other reason, its CEO is not
(30) obligated to maximize profits. The economists’ view is
that even if such a CEO’s purpose is to look to the
public good and nothing else, the CEO should still
work to maximize profits, because that will turn out
best for the public anyway.

(35) But the economists’ position does not hold up
under careful scrutiny. For one thing, although there
are, no doubt, strong underlying dynamics in national
and international economies that tend to make the
pursuit of corporate interest contribute to the public
(40) good, there is no guarantee—either theoretically or in
practice—that a given CEO will benefit the public by
maximizing corporate profit. It is absurd to deny the
possibility, say, of a paper mill legally maximizing its
profits over a five-year period by decimating a forest
(45) for its wood or polluting a lake with its industrial
waste. Furthermore, while obligations such as those of
corporate CEOs to corporate owners are binding in a
business or legal sense, they are not morally
paramount. The CEO could make a case to the owners
(50) that certain profitable courses of action should not be
taken because they are likely to detract from the public
good. The economic consequences that may befall the
CEO for doing so, such as penalty or dismissal,
ultimately do not excuse the individual from the
(55) responsibility for acting morally.

Spoiler: :: OA
A

1. Which one of the following most accurately states the main point of the passage?

(A) Although CEOs may be legally obligated to maximize their corporations’ profits, this obligation does not free them from the moral responsibility of considering the implications of the corporations’ actions for the public good.
(B) Although morality is not easily ascribed to nonhuman entities, corporations can be said to have an obligation to act morally in the sense that they are made up of individuals who must act morally.
(C) Although economists argue that maximizing a corporation’s profits is likely to turn out best for the public, a CEO’s true obligation is still to seek a profit for the corporation’s owners.
(D) Although some people criticize corporations for making unethical decisions, economists argue that such criticisms are unfounded because ethical considerations cannot be applied to economics.
(E) Although critics of corporations argue that CEOs ought to consider the public good when making financial decisions, the results of such decisions in fact always benefit the public.

Spoiler: :: OA
B

2. The discussion of the paper mill in lines 42–46 is intended primarily to

(A) offer an actual case of unethical corporate behavior
(B) refute the contention that maximization of profits necessarily benefits the public
(C) illustrate that ethical restrictions on corporations would be difficult to enforce
(D) demonstrate that corporations are responsible for many social ills
(E) deny that corporations are capable of acting morally

Spoiler: :: OA
B

3. With which one of the following would the economists mentioned in the passage be most likely to agree?

(A) Even CEOs of charitable organizations are obligated to maximize profits.
(B) CEOs of owner-operated noncharitable corporations should make decisions based primarily on maximizing profits.
(C) Owner-operated noncharitable corporations are less likely to be profitable than other corporations.
(D) It is highly unlikely that the actions of any particular CEO will benefit the public.
(E) CEOs should attempt to maximize profits unless such attempts result in harm to the environment.

Spoiler: :: OA
A

4. The conception of morality that underlies the author’s argument in the passage is best expressed by which one of the following principles?

(A) What makes actions morally right is their contribution to the public good.
(B) An action is morally right if it carries the risk of personal penalty.
(C) Actions are morally right if they are not fraudulent or illegal.
(D) It is morally wrong to try to maximize one’s personal benefit.
(E) Actions are not morally wrong unless they harm others.

Spoiler: :: OA
C

5. The primary purpose of the passage is to

(A) illustrate a paradox
(B) argue for legal reform
(C) refute a claim
(D) explain a decision
(E) define a concept

• Source: LSAT Official PrepTest 22 (June 1997)
• Difficulty Level: 650

_________________
Manager
Joined: 28 Jan 2017
Posts: 151
WE: Consulting (Computer Software)
Re: Many people complain about corporations, but there are also those whos  [#permalink]

### Show Tags

14 Dec 2019, 05:36
I am not able to understand the q5. Can someone please help me with it?
Senior RC Moderator
Joined: 02 Nov 2016
Posts: 4942
GPA: 3.39
Re: Many people complain about corporations, but there are also those whos  [#permalink]

### Show Tags

14 Dec 2019, 06:21
nkhl.goyal wrote:
I am not able to understand the q5. Can someone please help me with it?

Explanation

5. The primary purpose of the passage is to

Explanation

No use wasting a lot of time here: As we know, the author thinks that the economists’ position is wrong, and offers an alternative view on the issue. Once again, the first sentence of the last para (lines 35-36) tells the story— “the economists’ position does not hold up under careful scrutiny.” The rest of the para tells why. To refute the economists’ claim, choice (C), is the reason this passage was written.

(A) There is no paradoxical situation presented here, just one position countered by another.

(B) The passage is about the morality, not the legality of corporate behavior. In fact, it is implied that the kind of actions to which the author takes exception are legal; he opposes them because they don’t accord with his conception of morality.

(D) and (E) are both too weak to represent the author’s purpose here; they both ignore the fact that the author argues against a position and presents a case for his own view.

Hope it helps
_________________
Senior Manager
Joined: 31 Jan 2019
Posts: 285
Location: Switzerland
Concentration: General Management
GPA: 3.9
Many people complain about corporations, but there are also those whos  [#permalink]

### Show Tags

03 Jan 2020, 02:00
3
Hi everyone,
Got 4/5 correct in 11 minutes.

------------------------------------------------------------------------------------------

P1

In paragraph one we are given that many people criticize corporations not only for the possible illegal actions but also for being committed to maximize profit, a practice that according to these people is detrimental to society. Economists on the other hand claim that ethical reasoning cannot be applied to economical reasoning.

Brief summary: Corporations are detrimental to the public good according to many but economists disagree

P2

In paragraph 2 we are given that corporations are made of people to whom is delegated responsibility. Corporations can be run by a single owner or by a syndicate of people among whom the CEO is the most important figure.

Brief summary: Corporations' structure

P3

Economists think that the CEO must respond only to the owners of the company and in most cases the owners are interested in maximizing profits. Plus even when the company is a charitable organization, economists still think that the CEO's objective should be to maximize profits

Brief summary: Economists' view on the role of CEO

P4

In paragraph 4 we are given how the economists' view is flawed. The reason is that there is no guarantee that maximizing profits will result in something morally good. Examples such as forests decimation or polluting a lake are made in support of this idea. Last we know that a CEO is not excused to act without a moral just because the owners are just interested in maximizing the profits

Brief summary: The economists' view is flawed

Main point

The main point of this passage is to prove that the economists' view is biased

------------------------------------------------------------------------------------------

1. Which one of the following most accurately states the main point of the passage?

Pre-thinking

Main point question

Refer to main point and summaries above

(A) Although CEOs may be legally obligated to maximize their corporations’ profits, this obligation does not free them from the moral responsibility of considering the implications of the corporations’ actions for the public good.
Not in line with our pre-thought main point. Note that there might be 2 categories of main point: general and specific. Our pre-thought main point is general while this one is specific. So, the figure of the CEO is mentioned all across the passage; hence this choice is both correct and broad enough to be the main point

(B) Although morality is not easily ascribed to nonhuman entities, corporations can be said to have an obligation to act morally in the sense that they are made up of individuals who must act morally.
Partial scope with reference to P2

(C) Although economists argue that maximizing a corporation’s profits is likely to turn out best for the public, a CEO’s true obligation is still to seek a profit for the corporation’s owners.
This contrast does not make sense

(D) Although some people criticize corporations for making unethical decisions, economists argue that such criticisms are unfounded because ethical considerations cannot be applied to economics.
Partial scope with reference to P1

(E) Although critics of corporations argue that CEOs ought to consider the public good when making financial decisions, the results of such decisions in fact always benefit the public.
Wrong

------------------------------------------------------------------------------------------

2. The discussion of the paper mill in lines 42–46 is intended primarily to

Pre-thinking

Purpose question

"there is no guarantee—either theoretically or in
practice—that a given CEO will benefit the public by
maximizing corporate profit.
"

The purpose is to support the above lines

(A) offer an actual case of unethical corporate behavior
The idea is to support the fact that maximizing profits does not always turn out good for the public

(B) refute the contention that maximization of profits necessarily benefits the public
In line with pre-thinking

(C) illustrate that ethical restrictions on corporations would be difficult to enforce
out of scope

(D) demonstrate that corporations are responsible for many social ills
out of scope

(E) deny that corporations are capable of acting morally
out of scope

------------------------------------------------------------------------------------------

3. With which one of the following would the economists mentioned in the passage be most likely to agree?

Pre-thinking

Inference question

Let's evaluate the answer choice while keeping in mind that per the economists maximizing profits is always good

(A) Even CEOs of charitable organizations are obligated to maximize profits.
the passage uses "should"

(B) CEOs of owner-operated noncharitable corporations should make decisions based primarily on maximizing profits.
In line with pre-thinking

(C) Owner-operated noncharitable corporations are less likely to be profitable than other corporations.
cannot be inferred

(D) It is highly unlikely that the actions of any particular CEO will benefit the public.
cannot be inferred

(E) CEOs should attempt to maximize profits unless such attempts result in harm to the environment.
probably opposite

------------------------------------------------------------------------------------------

4. The conception of morality that underlies the author’s argument in the passage is best expressed by which one of the following principles?

Pre-thinking

inference question

It seems that per the author morality has something to do with benefitting the public.

(A) What makes actions morally right is their contribution to the public good.
In line with pre-thinking

(B) An action is morally right if it carries the risk of personal penalty.
cannot be inferred

(C) Actions are morally right if they are not fraudulent or illegal.
cannot be inferred

(D) It is morally wrong to try to maximize one’s personal benefit.
cannot be inferred

(E) Actions are not morally wrong unless they harm others.
This option is not true in all the cases. Let's say that a company in order to make a profit pollutes a lake in the middle of nowhere. Per the author such action is morally wrong but it does nor harm others by itself

------------------------------------------------------------------------------------------

5. The primary purpose of the passage is to

Pre-thinking

Main point question

[b]Refer to main point above

[/b]

(A) illustrate a paradox

(B) argue for legal reform
the author does not argue for legal reform

(C) refute a claim
the author throughout the passage works for weakening the claim of economists. Correct

(D) explain a decision
No decision explained

(E) define a concept
no concept defined

------------------------------------------------------------------------------------------

It is a good day to be alive!
Many people complain about corporations, but there are also those whos   [#permalink] 03 Jan 2020, 02:00
Display posts from previous: Sort by

# Many people complain about corporations, but there are also those whos

 new topic post reply Question banks Downloads My Bookmarks Reviews Important topics

 Powered by phpBB © phpBB Group | Emoji artwork provided by EmojiOne