If it makes others more virtuous → do it.

If it makes others less virtuous → don't do it.

For people who are more virtuous → praise makes them less virtuous.

For people who are less virtuous → praise makes them more virtuous.

Nobody except for the more virtuous deserve praise. In other words, the less virtuous don’t deserve praise. The more virtuous do deserve praise.

Sometimes people feel like this last implication - that the more virtuous do deserve praise - contradicts the way we would normally handle statements involving "except." But don't interpret "the more virtuous deserve praise" as a statement about every single individual person who is more virtuous. If we interpret it as a statement that the general category of people known as "the more virtuous" deserve praise, then this is a fair interpretation of the last sentence.

(If we don't accept the last sentence as asserting that "the more virtuous deserve praise," then the correct answer becomes much more difficult to justify. I wouldn't let this question change the way we typically handle statements that use "unless" and "except." But there are some rare cases in which the LSAT arguably tests a more nuanced understanding of these words and their relationship to other words/phrases that can be interpreted as claims about a generic category of things ("the more virtuous") as opposed to claims about every single individual member of a category.)

People who are more virtuous should not be praised (because it will make them less virtuous).

People who are less virtuous should be praised (because it will make them more virtuous).

People who deserve praise (the more virtuous) should not be praised.

People who do not deserve praise (the less virtuous) should be praised.

(Make sure to keep “should be praised” and “deserve praise” distinct. These are not the same concepts.)