ALL BUSINESS: CEO Pay Rise Shenanigans

"This management incentive structure could result in executive focus away from issues that we feel are critical to the success of Washington Mutual in 2008," Cannon said, who is calling on the board to "revisit" this plan.

Upscale home builder Toll Brothers also didn't give CEO Robert Toll a bonus in fiscal 2007 for the first time in 16 years. That happened after the housing slump resulted in the Horsham, Pa.-based company's first quarterly loss in 21 years and sent the stock plunging more than 35 percent in 2007 alone.

Yet things might not stay sour for Toll for long; the board's compensation committee signed off on a new way to calculate his annual bonus that will better allow him to be rewarded in a boom or a bust.

Previously, the bonus had been based on a percentage of net income, which had to exceed 10 percent return on equity and a stock-price growth adjustment was applied, according to The Corporate Library, an independent corporate governance research organization.

Starting this year, the board is proposing a plan whereby Toll stands to get 2 percent of the company's pretax income before subtracting from earnings the compensation expenses related to the actual cost of his bonus. Toll's bonus will also depend on the performance of a host of other factors, ranging from gross revenue and cash flow to issuance of new debt, acquisition of companies, overhead cost cuts and worker morale. His bonus will be capped at $25 million a year.

The good news is that investors get a say in Toll Brothers' pay changes if they vote against the plan, as two proxy advisory firms are recommending, the company will use the previous pay structure.

"It appears that the company has introduced this proposal as a way to ensure that (Robert) Toll receives a cash incentive even when company performance is suffering," one of the advisory firms, Proxy Governance Inc., said in a report to clients.

Toll Brothers, in a securities filing Tuesday, defended the plan as being geared toward performance if there is no pretax income before bonus then the CEO doesn't get paid. It also noted that the compensation committee can give zero discretionary bonus if it so chooses.

Sounds good on paper, but will it happen in practice? Let's hold them to it if business keeps going south.

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