Logical Reasoning

PT21 · S2 · Q15 In most corporations the salaries

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In most corporations the salaries of executives are set by a group from the corporation's board of directors.

Background

In most corporations, the executives salaries are set by a board of directors.

The board's primary mission is the economic health of the company, not making the executives rich, so the expectation is the board will not give the executives excessively large salaries.

Conclusion

But this is poor reasoning (i.e. having the board choose the salaries should not be expected to prevent excessively large salaries).

Evidence

Most board members are executives for some other corporation, and so they have an incentive to set a really high salary for this corporation's executives.

Evaluate

This is a really weird question stem, because it's not asking us to find the flaw with THIS argument. Instead, it's saying take the rebuttal the author gives in those last two sentences and pick and answer choice where a similar rebuttal would work.

So we could call it Parallel Flaw, but the flawed argument we're trying to parallel is the first two sentences (everything leading up to the "But").

People thought it was smart to make board of directors choose CEO salaries, since the board's priorities are the health of the company, not lining the pockets of the CEO.

But ... this plan kinda backfires in a "you scratch my back, I'll scratch yours" kind of way. Since tons of these board members are CEO's at other companies, they are incentivized to make CEO pay really high so that when the board of directors at their company is deciding on their salary, they'll look around the marketplace and see really high salaries being paid to CEO's everywhere.

It's kind of like price collusion. If all the gas stations decide to raise their gas 50 cents / gallon at the same time, then they can all benefit from the higher rates.

Goal

Look for an argument where a certain judge was supposed to be unbiased, but because that judge has other things going on, there's actually a weird incentive for the judge to be biased in a certain way.

15.

Which one of the following practices is vulnerable to a line of criticism most parallel to that used in the argument in the passage?

Correct
in medical malpractice suits, giving
Why this is right
The physicians not directly involved are meant to be unbiased judges. But ... since they may one day be sued for malpractice, they're incentivized to make damages low, so that the general expectation for malpractice damages is a lower number (thus benefiting them if they're ever sued and have to pay out damages).
Skill tested: Principle-Conform · how this choice captures the argument's function is the move to repeat next time.
48% picked this
in a legislature, allowing the
Not Unbiased
This is a totally biased source deciding on its own pay. There's no hidden incentive based on their other activities -- there is an obvious incentive relating to their role as legislators.
30% picked this
on a factory floor, giving
No Hidden Incentive
This is another case of the incentive being straightforward and transparent. There also isn't the component of a "supposedly unbiased" judge. The selfish incentive for the board of directors and for the non-connected physician in the malpractice case is not immediately apparent.
1% picked this
in a sports competition decided
No Hidden Incentive
This seems to be a case of genuinely unbiased judges. We don't know anything about these judges that would make us think they might have a vested interest in judging things a certain way.
4% picked this
in a business organization, distributing
No Indirect Incentive
These judges all have a direct incentive to offer negatively biased evaluations of the other members contributions, because that would potentially increase their share of the bonus pool. In the original (and the correct answer), it seems like the judges have no reason to be biased in THIS matter, but because they might be helped in ANOTHER matter, it gives them an indirect incentive to be biased in this matter. In this argument, the judges would have a direct incentive to be biased in this matter.
17% picked this

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