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P
rofessors Kenneth A. Merchant and Wim A. Van der Stede wrote this teaching note as an aid to instructors using The Sales
A
cceleration Program case.
Marshall School of Business
University of Southern California
The Sales Acceleration Program
Teaching Note
Purpose of Case
This short case describes a specific illustration of a form of earnings management that many
managers use to achieve their annual (or quarterly) budget targets. They push the production
line a little harder at the end of the accounting period to generate more shipments and billings.
Suggested Assignment Questions
For an ethics discussion, we suggest using the following question:
Did the SPD managers act in an ethical manner in deciding to implement the Sales
Acceleration Program?
Instructors can add other questions if they want to motivate other discussions. It can be useful to
Merchant & Van der Stede, Management Control Systems, 3rd edition, Instructors Manual
421
Case Analysis
The ethics analysis of the situation can be organized as follows:
Determine the facts:
Who, what, where, when, and how:
SPD is in the fourth quarter of the year, and it needs strong performance in the quarter to
achieve its annual profit target.
Achieving the profit targets is important because it affects payouts in what is called a
lucrative bonus program.
The management team met to brainstorm what might be done. The Sales Acceleration
Program idea surfaced at this meeting. No other alternatives were identified.
Define the ethical issues:
Stakeholders: SPD
The SPD management team
Ethical issues:
If the Sales Acceleration Program is implemented, the following stakeholders will benefit in
the short run:
The SPD management team will earn higher bonuses and their job security will be increased.
Merchant & Van der Stede, Management Control Systems, 3rd edition, Instructors Manual
422
The following stakeholders are harmed:
CFC will have to bear increased borrowing costs.
The SPD production employees welfare is harmed because they do not want to work
Decision alternatives and their probable consequences:
1. Implement the Sales Acceleration Program, achieve the annual profit targets, and earn
Compare the alternatives with the ethical principles and choose the best
alternative:
Is the Sales Acceleration Program ethical? Major ethical principles:
1. Greatest good for the greatest number of people
3. Rights and duties
4. Virtues
The major benefit is to the SPD management team, but they have not done anything to warrant
their earning the higher bonuses. Therefore, using a utilitarianism (consequentialism) line of
reasoning, the Sales Acceleration Program probably can be said to be unethical.
One might conclude that the Program is not fair to the production employees who are made to
Merchant & Van der Stede, Management Control Systems, 3rd edition, Instructors Manual
423
Pedagogy
Like most of the other ethics cases, this case can be discussed with the entire class or with small
groups. If the class is broken into small groups, have each group analyze the case and reach a
