PrepTest 141, Section 2, Question 4
Principle: The executive in a given company whose(28 more words not shown)
Which one of the following(9 more words not shown)
- AThe president of(24 more words not shown)
- BThe president of(26 more words not shown)
- CThe president of(29 more words not shown)
- DThe president of(29 more words not shown)
- EThe president of(26 more words not shown)
Reading the argument
If a consultant wants more business from an executive's company, I can see why the consultant might recommend a generous salary for that executive. Keeping the executive happy could help the consultant get more work. That's the concern behind this principle.
But the rule says “likely,” not “certain.” It identifies a situation in which we should expect overpayment: an outside consultant advises on the executive's compensation and also has business interests with the company. It doesn't say this is the only way an executive can be overpaid.
What we’re looking for
To apply the principle, find both parts of that situation. Then the supported judgment is that the executive is probably overpaid.
Working the answers
- A
Forty times the average employee's compensation might sound like a lot, but this principle doesn't set a fair ratio between executive and employee pay. We need outside advice from a consultant with other business interests in the company. A supplies neither that situation nor the rule's cautious conclusion: it says “definitely.”
- B
The date of the pay decision and the company's profits aren't the conditions in the principle. Perhaps pay set during a profitable period is excessive now; perhaps it remains appropriate. This particular rule doesn't settle that question. We need to know about the consultant and the consultant's other business interests.
- C
Not using an outside consultant removes the situation described in the rule. It doesn't establish that the president is probably not overpaid. The board could set an excessive salary on its own. The principle gives us one reason to expect overpayment, not a promise that every other method produces reasonable compensation.
- DCorrect
The board follows an outside consultant's advice in setting the president's compensation, and that consultant has many other contracts with Troskco. Those contracts supply the additional business interest. Both conditions are present, so the judgment that the president is probably overpaid follows the principle's level of confidence.
- E
Having no other contracts removes the stated reason to expect overpayment. It doesn't prove that overpayment is impossible. Even a consultant with no other company contracts could recommend an excessive salary. And “definitely not” is stronger still: the principle offers no guarantee of appropriate pay when its described situation is absent.
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