Yeah, this is really an extension of "praise in public, criticize in private," which is one of the golden rules of good management. Non-tech management understands this concept better than tech management, perhaps.
Tech people really suck at negotiation and that doesn't stop when they become managers. Which means that they don't realize that "You need to be hard on your reports" is a test and not a directive.
When the boss^2 (who does understand negotiation and human dynamics) says "You need to be tougher on your reports", saying "Yes, sir" means you fail the test. If you're not standing up for your reports and selling their efforts with highest praise, then they probably aren't loyal to you, either.
That, and if you're a boss, badmouthing anyone on your team to your own boss sends a message that you can't keep your house in order and maybe you aren't fit to lead a team.
So if you're a manager and you're smart, then when your boss asks you about your reports, the correct answer is always yes sir/ma'am, everyone is doing great--anything less reflects poorly on your ability to manage them. Your boss doesn't want to deal with people-managing your reports, that's why he/she hired you in the first place.
