Anne Mulcahy, CEO of Xerox, will receive a bonus based mostly on cash flow and secondarily on earnings per share.

NYT / Judith Pszenica

When executives have a tough time meeting their performance goals, a growing number of companies are moving the goalposts for them.

Instead of paying bonuses to top executives when revenue or profits rise — less and less likely in this dark economy — companies have disclosed plans to offer awards based on other measures of success. A bonus may be more attainable if based, say, on preserving cash flow.

Xerox has dropped revenue growth as a factor in determining bonuses for its executives, the company disclosed recently in regulatory filings. The company will rely instead mostly on cash flow and secondarily on earnings per share.

“In this unstable economy it is critical that we focus on cash generation and earnings,” said Carl Langsenkamp, a Xerox spokesman, in an e-mail message. “So as the economy shifts there are times that we reset priorities.”

Under the old system, which included revenue growth, Xerox’s chief executive, Anne M. Mulcahy, got a bonus of $990,000 for 2008, less than half of the $2.2 million she received a year earlier. Other top executives saw similar reductions in their bonus awards, according to Xerox’s proxy.

But changes such as these raise concerns among institutional investors who worry that companies may be looking for ways to pay bonuses regardless of performance.

“What makes a lot of investors anxious is, not only is it changing, but it could allow for gaming of these incentive programs,” said Michael McCauley, corporate governance officer at the Florida State Board of Administration, the investment manager for the state’s pension plan. “You just kind of have to do some analysis of why that change was made,” and whether it is an incentive that benefits investors, he continued. “Is the actual change a good one?”

Companies generally point to the economic downturn and argue that this year, missing the kind of performance targets used in the past does not result from poor management. It would be unfair to withhold pay from executives, in this view, because they may be doing a good job while circumstances beyond their control sabotage their efforts.

A systematic comparison of disclosures in proxies is time-consuming; bonus terms are not always reduced to easily searched charts or tables.

“The disclosures we’re highlighting were very far and few between in past years,” said Alexander Cwirko-Godycki, research manager at Equilar, which identified several modified bonus plans for The Times. “It’s safe to say that this crisis environment, whatever you want to call it, is forcing companies to try to make these changes.”

Perhaps most controversially, some companies adjusted performance goals on the fly in 2008, generally making it easier to earn bonuses.

Consultants who specialize in executive pay say that changes to bonus programs are not necessarily against the interests of shareholders, who benefit from keeping and motivating talented managers. Allowing a company to reset performance goals during the year, providing more opportunities to react to the changing economy, may make sense.

“There’s a feeling that judgment should be used,” said James F. Reda, managing director of James F. Reda & Associates, a compensation consulting firm. “That’s what we’re seeing.”

One way to ensure that hard-working executives get the bonuses they deserve is to include a relative measure of performance that compares results with those of competitors. That helps mitigate the effects of a declining economy, because all the companies in a particular business would face similar pressures, said McCauley of the Florida State Board of Administration.

“What investors really want to see is that they’re stretch goals — they’re not necessarily easily attainable,” McCauley said.

Reasonable people may differ on what best reveals the quality of an executive’s work, but putting too much emphasis on investors’ returns poses its own risks. Shareholders may not always be best served by strategies to increase earnings at any cost. Remember the pressure to inflate numbers at Enron back in 2001.

Changing business conditions may alter everything from the executive skills needed to the bonus measurements, remarked Brian T. Foley, managing director of Brian Foley & Co., a compensation consulting firm in White Plains, in an e-mail message. “But the underlying pay-for-actual-performance dynamic still must be clear, significant and readily defensible.”