The manager of one division of a large firm receives compensation in the form of salary plus bonus. A significant portion of the total compensation is based directly on the annual profits of the division. Thus, the manager s inclined to increase profits by delaying certain expenses such as research and development, maintenance and repair of manufacturing equipment, and sales promotions. Requirement: Are the above actions unethical? Why?
The manager of one division of a large firm receives compensation in the form of salary plus bonus. A significant portion of the total compensation is based directly on the annual profits of the division. Thus, the manager s inclined to increase profits by delaying certain expenses such as research and development, maintenance and repair of manufacturing equipment, and sales promotions. Requirement: Are the above actions unethical? Why?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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