How much does a company's success depend on its CEO? Many corporate consultants claim that CEOs are extremely important and...
GMAT Reading Comprehension : (RC) Questions
How much does a company's success depend on its CEO? Many corporate consultants claim that CEOs are extremely important and deserve great financial compensation. However, consultants who win big pay packages for their CEO clients are often rewarded with further, lucrative consulting contracts. Several independent experts who have statistically analyzed corporate performance have concluded that individual CEOs usually have a minor impact.
A number of scholars argue that most corporate employees feel more allegiance to small groups of co-workers than to their corporation as a whole, so the CEO's power to affect morale and performance, while strong within the immediate team of top executives, rapidly diminishes beyond that team. This would suggest that most power to influence corporate performance resides with middle managers, who interact directly with a greater number of employees. However, if middle managers see CEOs receiving disproportionate rewards, their loyalty to the corporation may be strained. Thus, reducing CEOs' compensation could actually improve corporate performance.
Some business analysts note that in competitive high-tech industries where choices about which new products to develop are crucial and difficult, CEOs impact performance more strongly, since they are responsible for these choices. However, this does not imply that most CEOs in these industries deserve vast compensation, for their choices yield disastrous consequences at least as often as they do positive ones.
To support the main conclusion of the passage as a whole, each paragraph in the passage
1. Passage Analysis:
Progressive Passage Analysis
| Text from Passage | Analysis |
|---|---|
| How much does a company's success depend on its CEO? | What it says: Opens with a question about how important CEOs are to company success What it does: Introduces the main topic/question the passage will explore Source/Type: Author's framing question Connection to Previous Sentences: First sentence - establishes the central debate Visualization: Think of a scale from 0-100% - we're asking where CEO impact falls on this scale Reading Strategy Insight: Classic RC opening - identifies the main issue. Everything that follows will relate back to this question. |
| Many corporate consultants claim that CEOs are extremely important and deserve great financial compensation. | What it says: Corporate consultants believe CEOs are very important and should be paid a lot What it does: Provides the first answer to the opening question - the "high importance" view Source/Type: Corporate consultants' claim/opinion Connection to Previous Sentences: This directly answers the opening question with one perspective - CEOs ARE very important Visualization: CEO importance scale: Consultants say 90-100% important CEO compensation: Consultants support packages of $10+ million Reading Strategy Insight: The author is setting up different viewpoints. Expect counterarguments to follow. |
| However, consultants who win big pay packages for their CEO clients are often rewarded with further, lucrative consulting contracts. | What it says: Consultants get more profitable work when they help CEOs get big pay packages What it does: Questions the consultants' motives - suggests bias in their opinion Source/Type: Author's observation/implication Connection to Previous Sentences: This immediately challenges the previous sentence - suggests consultants might not be objective about CEO importance Visualization: Consultant gets CEO a $15 million package → Consultant earns $2 million more in future contracts Reading Strategy Insight: The "However" signals doubt about the consultants' view. The author is building skepticism about the "CEOs are extremely important" position. |
| Several independent experts who have statistically analyzed corporate performance have concluded that individual CEOs usually have a minor impact. | What it says: Unbiased researchers who studied the data found CEOs don't matter much What it does: Presents the opposing view with seemingly more credible sources Source/Type: Independent experts' research conclusions Connection to Previous Sentences: This directly contradicts the consultants' view - "minor impact" vs "extremely important" Visualization: CEO importance scale: Independent experts say 10-20% important (vs consultants' 90-100%) Reading Strategy Insight: "Independent" and "statistically analyzed" suggest more trustworthy than biased consultants. The author seems to favor this view. |
| A number of scholars argue that most corporate employees feel more allegiance to small groups of co-workers than to their corporation as a whole, so the CEO's power to affect morale and performance, while strong within the immediate team of top executives, rapidly diminishes beyond that team. | What it says: Employees care more about their immediate work teams than the whole company, so CEOs only influence their direct reports, not most employees What it does: Explains WHY CEOs have limited impact - provides the reasoning behind the "minor impact" conclusion Source/Type: Scholars' argument with logical reasoning Connection to Previous Sentences: This builds on the "minor impact" idea by explaining the mechanism - CEO influence doesn't reach most employees Visualization: CEO influences 10 top executives strongly, but influence drops to near zero for the other 2,000 employees Reading Strategy Insight: This is explanation, not new complexity - the author is helping us understand the logic behind limited CEO impact. |
| This would suggest that most power to influence corporate performance resides with middle managers, who interact directly with a greater number of employees. | What it says: Middle managers probably have more influence than CEOs because they work directly with more employees What it does: Draws the logical conclusion from the previous reasoning Source/Type: Author's logical inference ("This would suggest") Connection to Previous Sentences: This restates the implication of the scholars' argument - if CEOs can't reach most employees, then middle managers (who can) must be more important Visualization: 50 middle managers each influence 40 employees directly vs CEO influencing 10 executives who struggle to influence others Reading Strategy Insight: Feel confident here - this is just connecting the dots from what we already learned. No new information. |
| However, if middle managers see CEOs receiving disproportionate rewards, their loyalty to the corporation may be strained. | What it says: When middle managers see CEOs getting huge pay while they don't, middle managers might become less committed What it does: Identifies a negative consequence of high CEO compensation Source/Type: Author's logical reasoning Connection to Previous Sentences: This builds on the idea that middle managers are important - if they're important but feel undervalued compared to CEOs, that's a problem Visualization: CEO gets $20 million, middle manager gets $200,000 → middle manager feels unfairly treated → works less hard Reading Strategy Insight: The argument is building logically: middle managers matter more, so keeping them happy matters more than justifying high CEO pay. |
| Thus, reducing CEOs' compensation could actually improve corporate performance. | What it says: Paying CEOs less money might make companies perform better What it does: States the main conclusion of the argument built so far Source/Type: Author's conclusion ("Thus" signals this) Connection to Previous Sentences: This is the logical endpoint of everything we've read: CEOs have little impact + middle managers have more impact + high CEO pay hurts middle manager morale = lower CEO pay could help performance Visualization: CEO salary drops from $20M to $5M → middle managers feel more valued → they work harder → company performs better Reading Strategy Insight: This is pure summary - we should feel confident because it just connects all the previous dots. The author has walked us through the complete logic. |
| Some business analysts note that in competitive high-tech industries where choices about which new products to develop are crucial and difficult, CEOs impact performance more strongly, since they are responsible for these choices. | What it says: In tech companies where product decisions are really important, CEOs do matter more because they make those key decisions What it does: Introduces an exception to the "CEOs don't matter much" argument Source/Type: Business analysts' observation Connection to Previous Sentences: This acknowledges a limitation to the main argument - there ARE some situations where CEOs matter more Visualization: Tech CEO decides whether to develop smartphones vs tablets → decision affects company's $10 billion revenue → CEO impact is high in this case Reading Strategy Insight: Good authors acknowledge counterarguments. This doesn't destroy the main point, just shows the author is being fair and thorough. |
| However, this does not imply that most CEOs in these industries deserve vast compensation, for their choices yield disastrous consequences at least as often as they do positive ones. | What it says: Even when CEOs make important decisions, they shouldn't get huge pay because they make bad decisions about as often as good ones What it does: Limits the exception and returns to the main argument against high CEO compensation Source/Type: Author's counterargument Connection to Previous Sentences: This reinforces the main conclusion - even in cases where CEOs matter more, high pay still isn't justified Visualization: Tech CEO makes 10 major product decisions: 5 succeed, 5 fail → high impact but mixed results → doesn't justify $25 million salary Reading Strategy Insight: We're back to the main point! The author considered an objection but ultimately reinforced the core argument. Feel confident - this strengthens rather than complicates the passage. |
2. Passage Summary:
Author's Purpose:
To challenge the idea that CEOs deserve huge pay packages by examining different viewpoints about how much CEOs actually matter to company success.
Summary of Passage Structure:
In this passage, the author builds a case against high CEO compensation by weighing different perspectives:
- First, the author presents the opening question about CEO importance and shows one side of the debate - corporate consultants who claim CEOs are extremely valuable and deserve big pay.
- Next, the author immediately questions this view by pointing out that consultants have financial reasons to support high CEO pay, then presents opposing research showing CEOs have little impact.
- Then, the author explains why CEOs have limited influence (employees care more about their immediate teams) and argues this means middle managers are more important, leading to the conclusion that high CEO pay could actually hurt company performance by making middle managers feel undervalued.
- Finally, the author acknowledges that CEOs might matter more in certain tech industries but argues this still doesn't justify huge compensation since CEOs make bad decisions as often as good ones.
Main Point:
CEOs generally have much less impact on company success than people think, and paying them huge amounts of money could actually hurt company performance rather than help it.
Question Analysis:
This question asks what each paragraph does to support the main conclusion of the passage as a whole. From our passage analysis, we identified that the main conclusion is that CEOs generally have much less impact on company success than people think, and paying them huge amounts could actually hurt performance. The question wants us to find what structural element all paragraphs share in their approach to supporting this conclusion.
Connecting to Our Passage Analysis:
Looking at our detailed breakdown, each paragraph consistently references different groups of experts and authorities:
- Corporate consultants who claim CEOs are important
- Independent experts who statistically analyzed performance
- Scholars who argue about employee allegiance patterns
- Business analysts who note CEO impact in tech industries
The passage builds its argument by systematically presenting what various authorities say about CEO impact, then weighing their credibility and motivations. This creates a comprehensive view that ultimately supports the conclusion that high CEO compensation isn't justified.
Prethinking:
The question asks what ALL paragraphs do to support the main conclusion. Since every paragraph references different types of authorities (consultants, experts, scholars, analysts), the answer should relate to how the passage uses these various authoritative sources. The passage doesn't just present random opinions - it specifically cites people "presumed to have studied" or analyzed CEO impact, building credibility through expert testimony while questioning motivations where appropriate.
Why It's Right:
- Every paragraph references authorities who have studied CEO impact: corporate consultants, independent experts, scholars, and business analysts
- The passage builds its argument by systematically presenting what these various authorities conclude about CEO influence
- Each group is presented as having expertise or having conducted research relevant to CEO performance impact
Why It's Wrong:
- While some paragraphs discuss employee perceptions (middle managers seeing CEO compensation), not every paragraph addresses how CEOs are viewed by employees
- The opening paragraph focuses on consultant and expert conclusions, not employee viewpoints
- The final paragraph about tech industries doesn't mention employee perspectives
- Doesn't the passage talk about middle managers' loyalty being strained?
→ Yes, but only one paragraph discusses employee views - this choice requires ALL paragraphs to share this element - Isn't employee morale mentioned as part of CEO influence?
→ The passage discusses this, but as an analysis of CEO limitations, not how employees view CEOs
Why It's Wrong:
- Not every paragraph describes circumstances where CEOs have significant effects
- The second paragraph emphasizes that CEOs usually have "minor impact," which contradicts significant effect
- Most paragraphs actually argue against CEO significance rather than describing when they're significant
- Doesn't the passage mention CEO power within the executive team?
→ Yes, but this describes limited scope, not significant overall effect - What about the tech industry example?
→ Only the final paragraph discusses significant CEO impact - this choice needs ALL paragraphs to do this
Why It's Wrong:
- While the passage discusses corporate structure elements (executive teams, middle managers), not every paragraph focuses on structural determinants
- The opening paragraph about consultants and compensation doesn't analyze corporate structure
- Some paragraphs focus more on research conclusions than structural analysis
- Doesn't the passage analyze how CEO influence works through corporate hierarchy?
→ Some paragraphs do, but the question asks what ALL paragraphs do - Aren't middle managers part of corporate structure?
→ Yes, but this appears in middle paragraphs, not throughout the entire passage
Why It's Wrong:
- Only some paragraphs discuss how CEO compensation creates counterproductive incentives
- The opening paragraph about consultant motivations and middle manager loyalty covers this, but not every paragraph does
- The final paragraph about tech CEOs doesn't focus on incentive structures
- Isn't the main point about CEO compensation being problematic?
→ Yes, but the question asks what structural element ALL paragraphs share, not the overall theme - Don't consultants have incentives to inflate CEO pay?
→ This appears in the first paragraph, but other paragraphs focus on different aspects like research findings