Don't worry if you didn't get this exceptionally difficult question correct. Later lessons in Advanced Logic will help to elucidate the concepts behind this question.
To see why (E) is incorrect, first recall what the practice in the stimulus was in a general form. Stated broadly, it was the practice of having people set standards from which they themselves would later benefit. This is why having executives sit on boards to determine salaries of other executives is not a great idea. This is also why having doctors sit on juries to determine damages for malpractice suits for other doctors is not a great idea. Whatever standard they set would later be used for them.
Now how does (E) do any of that? Sure you have a group of people. And there's something something money. That's it. Each person in the group is directly evaluating each other, confidentially but who cares. There's a set amount of money, say $100, to be given to the group consisting of say 5 people. Who gets how much? Well, that depends on how each person is evaluated by their peers. So... I guess if I'm in the group, I'm incentivized to give everyone else a low rating so that I could get more of the $100 pie? I guess. Wait but what am I even doing. I'm supposed to be setting a financial standard that would later benefit me. That's not what I'm doing at all. I'm just directly screwing my co-workers over so that I benefit.