I think there are a variety of possible issues. As Takashi says, you should only read the *.shp files with your PATH reader, otherwise the DBF, SHX, etc files will also be passed as valid source files. Also, I notice that you have two Shape readers and the prompt for both is "Source Esri Shapefiles" - can you make sure that you have these the right way around? One of them has a Feature Type filter set, but the other doesn't, so it's obviously important to get them correct!
However, neither of these would stop the workspace being run, so I don't know if it's the main issue.
Can you check the Task Manager to see if anything is actually being started and/or run?
It might also help if the source folder the PATH reader was reading from only contained one Shapefile. That way it'll be easier to see what is going on, and you should be able to find the log file from the child workspace and see if it ran and what happened.
If we know whether a helper process is started or not it will help to diagnose the issue.