I knew someone who did the "troops to teachers" thing and had the same problem with his principle. She expected all students to be given passing grades even if they turned in blank test papers. It made her statistics look better. She would say, "Success breeds success." My friend would answer, "Only if the initial success was earned. Otherwise, it breeds contempt for the system."
He only lasted a year.
What gets me is that we all know how good it feels when the lightbulb above the head goes on. The fake grades rob a kid of that, I think. Achievement is a gift they may not get to appreciate as a child, and that's criminal.