Step 1: Assess fairness and organizational interest.
The employees were insincere initially, but have now shown willingness to contribute. A balanced approach is required: accountability for the past, but scope for improvement in the future.
Step 2: Evaluate each option.
1. {Immediate firing} (Option 1) — harsh and does not acknowledge their change in attitude. Least appropriate.
2. {Average ratings with a chance to prove} (Option 2) — fair but not fully accounting for past insincerity. Moderately appropriate.
3. {Pay-cut but high ratings} (Option 3) — inconsistent and ethically questionable (salary cut without reflecting poor performance in ratings). Inappropriate.
4. {Poor ratings with chance to improve} (Option 4) — fairer since it penalizes past insincerity but still offers improvement opportunity. Most appropriate.
5. {High ratings with second chance} (Option 5) — too lenient, ignoring past behavior, but still shows positivity. Less appropriate than (2) and (4).
Step 3: Ranking order.
Most to least appropriate: 4 (best balance), 2 (moderate balance), 5 (too lenient).
\[
\boxed{\text{Answer: C (4, 2, 5)}}
\]