NEW YORK (CNNMoney.com) -- Maybe you missed your earnings target last year or your stock was crushed. But if you're a corporate executive, that might not necessarily prohibit you from earning a generous bonus.
Following an unprecedented period of economic turmoil, a number of corporate boards appear to have taken pity on executives last year. In some instances, they handed over millions of dollars in so-called discretionary bonuses to managers.
At United Technologies (UTX, Fortune 500), which manufactures everything from elevators to helicopters, its top six executives collected a combined $4.5 million in bonuses last year, even though the company failed to reach its goal of matching its 2008 profit performance.
Board members at the company defended the move however, maintaining that earnings at peers fell much further, while the company managed to achieve other important milestones, including not cutting its dividend.
"The Committee believes it achieved the appropriate balance in rewarding strong relative performance despite an absolute decline in earnings in 2009," the company wrote in its annual proxy statement.
Other companies deemed that top-performing execs were simply not compensated enough last year.
Starbucks (SBUX, Fortune 500) CEO Howard Schultz, for example, was awarded a $1 million bonus for helping to turn around the Seattle-based coffee retailer, bringing his total 2009 pay to $12.1 million. Board members originally ordered Schultz to forgo his salary and did not allow him to participate in the executive bonus program.
Typically, executive bonuses are judged based on a variety of factors, such as the company's stock performance, year-end earnings or other fundamentals.
But after the economy unraveled much faster than anyone ever anticipated, targets that once seemed attainable for many executives quickly moved out of reach. As a result, some boards looked elsewhere for indications that 2009 was indeed a good year.
"This was a year in which many [compensation] committees found themselves in that position because of the economy," said Rose Marie Orens, senior partner at the compensation advisory firm Compensation Advisory Partners.
At computer-maker Hewlett-Packard (HPQ, Fortune 500), for example, the best gauge was the company's performance against its peers. After deeming that CEO Mark Hurd was "not fully rewarded" by the $14.6 million bonus he received under the firm's annual incentive compensation program, the firm added a $1.2 million bonus for doing better than rivals like Dell.
Securing official numbers on discretionary bonuses is difficult as companies are just starting to disclose executive compensation in their annual proxies. But given the intense focus on and backlash against big pay on Wall Street, chances are that discretionary bonuses may be the exception rather than the rule.
The last thing a firm's compensation committee wants to do is defend why it granted a bonus to a seemingly underperforming executive, said Holly Gregory, a partner in the corporate governance practice at the law firm Weil Gotshal.
"There is a certain risk aversion on behalf of compensation committees," she said. "They know the spotlight is on them."
So far, shareholder activists, which have blasted board members in the past for lapses in judgment on compensation, have yet to make much fuss about discretionary bonuses.
But proxy advisory firm RiskMetrics recommended that shareholders withhold votes from five directors at medical imaging firm Hologic (HOLX), ahead of its annual shareholder meeting last week after the company gave its transitioning CEO multiple retention bonuses, despite a relatively poor stock performance.
Despite the attack, all five directors managed to receive majority support from shareholders, according to a subsequent company filing.
Paying bonuses during tough economic times could potentially become palatable, said Paul Hodgson, senior research associate at the corporate governance research firm The Corporate Library.
To do that though, he said boards would have to be just as willing to cut bonuses when executives miss lofty targets during a robust economic environment.
A federal judge says Ivanka Trump must give a deposition in a lawsuit brought against her by an Italian shoemaker claiming her fashion label copied its designs. More
Orlando Lopez's parents brought him to the U.S. seeking the American Dream, but he didn't find true happiness until after he was deported to Mexico. More
You'll still see ads in Gmail but they won't be inspired by your emails. More
In 1998, Ntsiki Biyela won a scholarship to study wine making. Now she's about to launch her own brand. More
The average guest at a wedding last year spent $888 per wedding, according to a study from the Knot. For those in the wedding party, the price of being a stand-up friend was over $1,000. More