The controller of one division of a large diversified firm is compensated by salary plus bonus. The bonus is a significant part of total compensation, and is based directly on the profits of the division. Thus, the controller has an incentive to find ways to increase profits, including the delay of discretionary expenses such as research and development, delay of maintenance and repair of manufacturing equipment, and delay of sales promotions. Required: Is finding ways to increase profits as described above unethical? Why or why not? Who is to blame if anyone?
The controller of one division of a large diversified firm is compensated by salary plus bonus. The bonus is a significant part of total compensation, and is based directly on the profits of the division. Thus, the controller has an incentive to find ways to increase profits, including the delay of discretionary expenses such as research and development, delay of maintenance and repair of manufacturing equipment, and delay of sales promotions. Required: Is finding ways to increase profits as described above unethical? Why or why not? Who is to blame if anyone?
Chapter14: Capital Structure Management In Practice
Section14.A: Breakeven Analysis
Problem 3QTD
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The controller of one division of a large diversified firm is compensated by salary plus
bonus. The bonus is a significant part of total compensation, and is based directly on
the profits of the division. Thus, the controller has an incentive to find ways to increase
profits, including the delay of discretionary expenses such as research and
development, delay of maintenance and repair of manufacturing equipment, and delay
of sales promotions.
Required:
Is finding ways to increase profits as described above unethical? Why or why not? Who
is to blame if anyone?
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