A controversial cash bonus plan that at least two proxy groups objected to was approved yesterday at Toll Brothers' annual shareholders meeting.

The Associated Press reported that under the new CEO bonus plan, Toll Brothers CEO Bob Toll would have received $6.56 million. The proxy groups objected to such high pay at a time when the industry is slumping.

In a letter to shareholders earlier this month, the company's independent directors said that contrary to the critics, the new bonus plan is based on performance-both company and individual-and are "at risk" if the builder does not make money.

"The CEO will only be entitled to the ... bonus if the company has pre-tax, pre-bonus income," said the directors. "Without such performance there is no pay," they concluded.

The directors also pointed out that under the leadership of company co-founders Bob Toll and Bruce Toll and CFO Joel Rassman, the company's stock price has risen from $1.04 per-share at the time of Toll's initial public offering in July 1986 to $21.21 per-share on Feb. 29, 2008.

Toll Brothers was also one of the few public builders to make a profit last year, producing fiscal 2007 net income of $35.7 million on $4.6 billion in revenues.

Scott Fenn, managing director for policy at Proxy Governance, one of the proxy firms that criticized the compensation plan, said it was "not a surprise" that the plan went through since Toll Brothers is such a closely held company.

"While Toll's performance is not at the bottom of the industry, our feeling is that the [top executives] got huge pay when times were good and wanted to rejigger the system during the down times so the payouts will continue," Fenn said.

Toll Brothers lost $96 million in the first quarter of fiscal 2008. The loss was the second quarterly loss in a row for the big builder after Toll reported an $81.8 million loss in the fourth quarter of fiscal 2007. Last year's fourth-quarter loss was big builder's first quarterly loss in 21 years of being a public company.