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There is little correlation between CEO compensation and the company's 24 Jun 2019, 07:51
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C
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35% (medium)

Question Stats:

75% (01:46) correct 25% (02:03) wrong based on 111 sessions

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There is little correlation between CEO compensation and the company's performance. If there were a considerable correlation, the companies that paid their CEOs the most would have highest growth in profits, revenue, and stock price. Most of companies that have performed best in terms of profit, revenue, and stock price growth over the last 2 decades have been the ones whose CEOs are their founders.


If the statements above are true, which of the following must be true?


A. None of the top performing companies over the past 2 decades have been led by CEO’s who are not founders of the company.
B. A company that pays its CEO a very high compensation is likely to perform worse than a company that does not compensate its CEO as well.
C. Founders of most of the companies that show highest growth in profit, revenue, and stock price are not amongst the highest paid CEOs in the industry.
D. CEOs who are also Founders of the company do not get paid as much as CEOs who are not.
E. If a company is not led by a founder, it will not be a top performing company in the future.

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C
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There is little correlation between CEO compensation and the company's 24 Jun 2019, 07:53
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Dear GC Verbal Experts,

Could you please help me to understand this inference question, I need different point of view.
Thank you in advance!
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There is little correlation between CEO compensation and the company's 24 Jun 2019, 07:55
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GKomoku
There is little correlation between CEO compensation and the company's performance. If there were a considerable correlation, the companies that paid their CEOs the most would have highest growth in profits, revenue, and stock price. Most of companies that have performed best in terms of profit, revenue, and stock price growth over the last 2 decades have been the ones whose CEOs are their founders.


If the statements above are true, which of the following must be true?


A. None of the top performing companies over the past 2 decades have been led by CEO’s who are not founders of the company.
B. A company that pays its CEO a very high compensation is likely to perform worse than a company that does not compensate its CEO as well.
C. Founders of most of the companies that show highest growth in profit, revenue, and stock price are not amongst the highest paid CEOs in the industry.
D. CEOs who are also Founders of the company do not get paid as much as CEOs who are not.
E. If a company is not led by a founder, it will not be a top performing company in the future.
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https://gmatclub.com/forum/there-is-lit ... l#p2297415

we have one thread with similar question but a little bit different answer choices
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There is little correlation between CEO compensation and the company's 24 Jun 2019, 08:13
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GKomoku
There is little correlation between CEO compensation and the company's performance. If there were a considerable correlation, the companies that paid their CEOs the most would have highest growth in profits, revenue, and stock price. Most of companies that have performed best in terms of profit, revenue, and stock price growth over the last 2 decades have been the ones whose CEOs are their founders.


If the statements above are true, which of the following must be true?


A. None of the top performing companies over the past 2 decades have been led by CEO’s who are not founders of the company.
The statement says that most of the top performers were led by founders, this AC is too extreme.
B. A company that pays its CEO a very high compensation is likely to perform worse than a company that does not compensate its CEO as well.
There is no indication about that is the statement, this reaches too far and argues too general without the respective evidence.
C. Founders of most of the companies that show highest growth in profit, revenue, and stock price are not amongst the highest paid CEOs in the industry.
This one looks good as it focuses on the types of CEOs which the studies names as being very successful, let's keep it for now.
D. CEOs who are also Founders of the company do not get paid as much as CEOs who are not.
This one is tricky, but if we look closely, we only know that most of the top performers were CEOs that also founded their company. However, there could be dozens of well-paid founders whose companies are doing poorly
E. If a company is not led by a founder, it will not be a top performing company in the future.
This one is very general and far overreaches based on what is given in the original statement.

Now we are left with AC "C".
This is our best selection as it addresses both aspects of the argument and focuses only on the relevant correlation (The salary of CEO´s of high performing companies that were also founders is compared to the salary of the rest of the CEOs in a given industry.
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I´ll try my luck. :)
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There is little correlation between CEO compensation and the company's 24 Jun 2019, 08:21
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the answer is C , my reasoning , first line of argument says , no relation between pays and perfomance , evidence in second line - high performing/profit companys do not pay their CEOS , third line - High profit comany’s CEOs are founders. We need to use anology of the rule A=b ,b=c that means A=C , same is here no relation between profit and pays means founder CEOs are not getting enough pay . I hope this clears your doubt :)
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There is little correlation between CEO compensation and the company's 24 Jun 2019, 09:47
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GKomoku
There is little correlation between CEO compensation and the company's performance. If there were a considerable correlation, the companies that paid their CEOs the most would have highest growth in profits, revenue, and stock price. Most of companies that have performed best in terms of profit, revenue, and stock price growth over the last 2 decades have been the ones whose CEOs are their founders.
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My OA



First of all lets decipher the given prompt:



There is little correlation between CEO compensation and the company's performance.

There is nothing can be compared between CEO compensation and the company's performance, there is no related trend.

If there were a considerable correlation, the companies that paid their CEOs the most would have highest growth in profits, revenue, and stock price.

Hypothetical situation, If there were any significant correlation between CEO compensation and the company's performance, such as the companies that paid their CEOs the most would have highest growth in profits, revenue, and stock price and so on. But there there is NO SUCH CORRELATION.

So can we ignore this past of the prompt? Or any part of the prompt, even if it is hypothetical situation cannot be ignored?

If it is not ignored. What can be inferred?


Because this sentence states "the companies that paid their CEOs the most" so in reality companies DO NOT PAY their CEOs the most.
Seems reasonable so far.

Most of companies that have performed best in terms of profit, revenue, and stock price growth over the last 2 decades have been the ones whose CEOs are their founders.

High profit companies' CEOs are their founders

So in our own words, we can combine above statements:

Founders as CEOs don't have high salaries. :idea:

p.s. thank you for snehaluk helping to up with this]


Question stem



If the statements above are true, which of the following must be true?


Question type:



Inference (must be true)


Answer choice analysis:



A. None of the top performing companies over the past 2 decades have been led by CEO’s who are not founders of the company.

Analysis of (A): For the last 20 years the top performing companies have been led by CEOs as Founders.

Analysis in terms of prompt: This is too extreme expression. But 'extreme' expressions are not necessarily always wrong. We just have to be careful with them. In terms if given prompt we don't have any sufficient informations to support this answer choice. (A) is incorrect.


B. A company that pays its CEO a very high compensation is likely to perform worse than a company that does not compensate its CEO as well.

Analysis of (B): We have comparison here, between a company that pays its CEO a very high compensation and a company that does not compensate its CEO as well Latter perform better than former.

Analysis in terms of prompt: We don't have any comparison in the prompt, we just have hypothetical situation about correlation between CEO compensation and the company's performance, prompt doesn't support this information also. (B) is incorrect.


C. Founders of most of the companies that show highest growth in profit, revenue, and stock price are not amongst the highest paid CEOs in the industry.

Analysis of (C): Founders of top performing companies don't have high salaries.

Analysis in terms of prompt: This is exactly that inference that we get by our own words. (C) is correct.


D. CEOs who are also Founders of the company do not get paid as much as CEOs who are not.

Analysis of (D): We have comparison here, between CEO-Founder salary and CEO-NOT-Founder salary. Latter have high salary than former.

Analysis in terms of prompt: We have some information about founders, CEOs, and top performing companies in the prompt. But we don't have enough information to provide enough evidence for this comparison. (D) is incorrect.


E. If a company is not led by a founder, it will not be a top performing company in the future.

Analysis of (E): We have strong conditional here. If a company is led by a founder, it will be a top performing company in the future.

Analysis in terms of prompt: It is very strong statement. Moreover gives general condition for some events. This option is not sufficient to hold true along with prompt. (E) is incorrect.


p.s. thank you for Arro44 helping to up with this, and good luck with MIT ;) ]

Answer is C



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