There is little correlation between CEO compensation and the

Question

There is little correlation between CEO compensation and the company’s performance. If it were so, the companies that paid their CEOs the most would have highest growth in profits, revenue, and stock price. However, 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 that have been led by their founders.

Which of the following can be inferred from the passage above?
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 CEO who is extremely well paid is probably not as much motivated since he/she does not expect to be compensated higher.
C. A company that pays its CEO a very high compensation is equally likely to perform as well as or worse than a company that does not compensate its CEO as well.
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.

aditya8062 · Answer

C seems best here :  A company that pays its CEO a very high compensation is equally likely to perform as well as or worse than a company that does not compensate its CEO as well.

what is the source of this question?

Also D cannot be concluded  as the argument is talking just about the fact that most successful companies are led by founders.from this info it cannot be concluded whether founders were paid as much as the CEO's

dream21 · Answer

D seems correct here. 
The argument can hold good only if we understand that the founders as CEO are compensated less than the CEO's who are not founders. If the founder is paid more then the argument seems incorrect.

In  Choice C 
The argument talks about correlation between performance and compensation. The premise further explains about the positive correlation,i.e. increase in compensation will result in increase in performance.
 In Choice C we cannot infer what ll be the case when a CEO is compensated less.

aditya8062 · Answer

where did u read this? the premise is using  "hypothetical subjunctive" -----> "If it were so, the companies that paid their CEOs the most would have highest growth in profits, revenue, and stock price" -----. This definitely  does not mean  a positive correlation

smit29may · Answer

I agree with Aditya. The point that there isn't a correlation between compensation and performance proves that no matter what the compensation is, the performance is likely to to be affected by that factor. 
Hence, C

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aditya8062 · Answer

i guess u wanted to write : The point that there isn't a correlation between compensation and performance proves that no matter what the compensation is, the performance is  NOT  likely to to be affected by that factor.

itzmyzone911 · Answer

IMHO (C).

To begin with, let us understand that we are dealing with 6 sets of leaders.
1.CEO's (well-paid) who are not founders
2.CEO's (not well-paid) who are not founders
3.CEO's (well-paid) who are also founders.
4. CEO's (not well-paid) who are also founders.
5.Founders who are not CEO's.
6.Neither CEO’s nor founders.

Back to the question….

There is little correlation between CEO compensation and the company’s performance. If it were so, the companies that paid their CEOs the most would have highest growth in profits, revenue, and stock price. However, 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 that have been led by their founders.

Which of the following can be inferred from the passage above?
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.
Incorrect. Passage states 'most' companies who have performed well have been led by founders, implying some top companies (at least one) have been led by those who are not founders (Set 1, 2 and 6), with a higher probability of these leaders belonging to sets 2 or 6 than set 1. The given statement would be justified only if the stimulus had enough data to explicitly prove that, of all those companies at the top not led by founders, all of the founders are not CEO’s (i.e. all top companies are led by leaders belonging to sets 3,4,5 and 6 only). 
B. A CEO who is extremely well paid is probably not as much motivated since he/she does not expect to be compensated higher.
Incorrect. Out of scope. The fact that companies with highest paid CEO’s are not performing well need not be a function of CEO’s motivation and duty-boundedness only. Quite likely that these CEO’s are actually charged-up but other random factors are major deterrants.
C. A company that pays its CEO a very high compensation is equally likely to perform as well as or worse than a company that does not compensate its CEO as well.
Correct. Stimulus mentions that a poor correlations exists between CEO pay and company performance. At the same time, a good correlation exists between leaders who are founders and company performance. This implies that the combined probability of a leader of a high-performing company to belong to set 1 or 3 is definitely much lower than that of him belonging to sets 3 or 4 or 5. 
D. CEOs who are also Founders of the company do not get paid as much as CEOs who are not.
Incorrect. Statement is comparing pay of set 1 and set 3 leaders. No information in the stimulus to conclude this statement as it is quite likely that both these sets of leaders are equally paid. Lacking evidence to the contrary, it is as much possible that CEO’s who are also founders are paid more than those who are not.
E. If a company is not led by a founder, it will not be a top performing company in the future.
Incorrect. Stimulus does not state that being a founder is a mandatory condition for a company to perform well. The stimulus merely demonstrates the findings as on today and in no way suggests that these findings are a reflection of what will happen in the future.

sallysea · Answer

Please, specify the source of the question!

chesstitans · Answer

man, I ignored the key word "likely" in C. Using POE, I can guess C be the right answer, but I chose a wrong option.

doeadoer · Answer

Can a verbal expert pls help with this question?

chesstitans · Answer

which part of the question that you get stuck? -> A & E are wrong. B and D is out of scope. Although it is hard to understand C correctly, but C is the right answer.

bluetrain · Answer

The reason why (D) can not be a right answer is that there could be a CEO who gets the highest payment, are a founder, and have performed best in terms of profit.

So (D) is "can be true"

chesstitans · Answer

since "the company" in D is not clear, I assume that D is out of scope if you get what I mean.

kartickdey · Answer

C might be The best answer but not perfect; the option is not well constructed. The correlation may be poor or little but still there is a correlation. In that case the likelihood can not be equal.

miag · Answer

Hi,

You are right that the wording is a bit confusing but I would say focus on how the word "little" is being used - I think that's where the play is:

Here, "there is little correlation means" - there is hardly any correlation but there is some (not none). Its about paying attention to what modifiers like "little" vs "a little" do to the meaning of the sentence. For e.g. a little would have made this positive. 
 Aligned with the meaning above, the answer is - C) Basically that the 2 are not strongly correlated and hence one variable (pay) isn't a predictor of the other (performance)

Hope this helps!

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There is little correlation between CEO compensation and the

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