Is accelerating sales to make earnings more attractive in a year
ethical?  Give example.

It depends on the purpose and method of the sales acceleration.  If
the firm benefits financially from the sales acceleration, then it
would be ethical.  However, if the firm winds up worse off financially
once the full effects of the sales acceleration occur, then the sales
acceleration is potentially unethical.  One also has to consider the
purpose of the sales acceleration.  The firm's objective is to benefit
its current shareholders.  However, short-term manipulations that
allow securities transactions to occur at more favorable prices or
that allow management to receive options or bonuses would tend to be
unethical.

If the sales are accelerated through heavy discounting/stuffing the
channel which will hurt future sales and generate returns, then the
firm is hurt financially and the sales acceleration would seem to be
unethical.  Any kind of illegal accounting manipulation to increase
sales is clearly unethical (the problems that Computer Associates is
an excellent example of this phenomenon).  Accelerating sales in a
manner that increases the firm's current profitability without harming
future periods is certainly ethical (many firms engage in promotional
activity on a regular basis to drive profitability and evaluate what
types of promotions to run based on their earnings).  Accelerating
sales in a manner that creates a false expectation of the firm's
future financial performance when selling securities or so that
management can exercise options will receive bonuses is potentially
unethical and could also be illegal.

Sincerely,

Wonko

Hi Gabbygirl,

I really like Wonko-ga's answer, because I feel the same way. 
But questions about what is ethical or unethical can be more complicated.

You ask:  "Is accelerating sales to make earnings more attractive in a year
ethical?"
"It depends on the purpose and method of the sales acceleration.  If
the firm benefits financially from the sales acceleration, then it
would be ethical.  However, if the firm winds up worse off financially
once the full effects of the sales acceleration occur, then the sales
acceleration is potentially unethical."

The firm has benefited financially from the sales acceleration (your
premise), so it would be ethical, benefiting its current shareholders.
If this results in "exorbitant" benefits for management, then the
ethical question relates to the decision that gives them such
benefits.  Normally this would decided by the board (ostensibly
representatives of the shareholders) or the shareholders themselves at
the annual meeting, so that a complaint by them  as to the ethics of
management's having benefited, is countered by their own responsiblity
for the decision.  This applies to variations of the problem.

Incentive programs for management are frought with this problem.  If
the shareholders or their representative set up a system to measure
management success/effectiveness, they are asking management to do
that:  increase sales, income, share value.
"You get what you measure," is a comment about production: you count
items made, and you get more of them - at the expense of quality; you
count quality and you get few items but better quality.  The same
applies to management.

If management has been given the incentive to increase current income,
the shareholders cannot complain that that has reduced future
development and share value  - or vice versa.

It looks like a question of ethics  - especially with hindsight -  but
I think it is really a problem about the shortcomings management
incentive programs, one of the basic discussions about management of
large corporations.

Myoarin