The new rules in the school's code of conduct—including penalties for

OA from Manhattanprep
This sentence describes two features of the new rules. First, they include penalties for children who hoard candy; second, they include rewards for children who share the candy. To express these ideas effectively, the sentence should employ proper parallelism. Idiomatic expressions should be used correctly. Finally, the sentence should contain a main verb that agrees with the plural subject rules.

(A) The modifier to encourage…, while not ungrammatical, is nonsense here: it suggests that the purpose of criticizing the new rules is "to encourage children to share opportunistically rather than altruistically". Instead, the sentence should state basically the opposite: the critics claim that the rules encourage this kind of behavior. Also, the singular verb has been criticized does not agree with the plural subject rules.

(B) The noun penalties is not parallel to the verb reward. (Instead, there is parallelism between hoard and reward, illogically suggesting that the children who hoard candy "reward those who share".)

(C) Hoarding candy is not parallel to when they share, and penalties is not parallel to rewarding. The pronoun them appears to refer to the previously mentioned children hoarding candy, rather than to children in general. Finally, because of encouraging is unidiomatic.

(D) Penalties is not parallel to rewarding. Furthermore, rewarding is expressed as a modifier, illogically suggesting that, by hoarding candy, the selfish children are somehow causing the altruistic children to be rewarded. Finally, the singular verb has been criticized does not agree with the plural subject rules.

(E) CORRECT. Penalties and rewards are properly parallel, as are children who hoard candy and those who share it. The plural verb have been criticized agrees with the plural subject rules. On the grounds that they encourage… is idiomatically correct and clarifies the basis of the criticism.