The economy sinks to recession and the housing market remains a shambles, but the executive-pay machinery at MDC Holdings hums along, undeterred by such macroeconomic events.

We know this by reading the company's disclosure, made inconveniently on New Year's Eve, that CEO Larry Mizel and President David Mandarich will each receive bonuses of $2.5 million. Each will also get 60,000 shares, currently worth about $1.75 million, for the company's performance in 2008.

You are pardoned if this seems surprising. The company's stock fell 16.3 percent in 2008, which was a better performance than many home builders, but not all. For the first nine months of 2008, MDC's revenue dropped by nearly 50 percent from the year prior. It posted a net loss of $291.5 million in the first three quarters (which, at least, was smaller than the $355.8 million loss in the prior-year period.)

MDC's ability to pay bonuses to Mizel and Mandarich, regardless of circumstance, is a favorite topic of this column. During the housing boom, we examined an ever-escalating plan that paid the two men more than $20 million apiece in peak years.

That sacrosanct formula, first passed in 1994, gave Mizel and Mandarich a slice of the company's profits if it tops a goal of 10 percent return on equity. In the first year, the plan paid each man $700,000.

MDC got much bigger, though, with revenues growing sixfold and net income increasing fifteenfold over 11 years. By 2004, the bonuses topped $20 million.

Alas, what goes up . . . as profits (and the stock price) declined, the bonus fell, but only to $9.6 million in 2006. And for 2007, the plan's formula yielded a zero bonus payment.

MDC's board sprang to the rescue, instead awarding the two men $2 million apiece for 2007's performance. After all, MDC explained in its filings, "The compensation committee was confronted with the realization that the performance-based goals contained in the (bonus) plan . . . failed to take into consideration the achievements of the senior executive officers in preserving the financial integrity of the company in view of current market conditions."

To make things above-board, MDC had its shareholders vote last spring on a new bonus plan. Mizel and Mandarich could still receive their outsized bonuses if the company's profits were large. If not, the compensation committee could choose "performance objectives" from a smorgasbord of 18 metrics at the beginning of the year.

Thanks to votes cast by Mizel and Mandarich themselves, the new plan passed. Subtract their votes from the total, and the proposal got just under 50 percent of the remaining votes. Shareholders seemed to listen to the two of the three major proxy-advisory services that recommended shareholders vote "no."

"While the existing bonus plan has its flaws, it is in some ways more performance-oriented compared to the proposed (change), which would provide for bonus payouts of $2.5 million plus 60,000 restricted shares upon achieving undisclosed goals," RiskMetrics Group told its clients last spring.

Shareholders of MDC, rejoice! Things worked out exactly as could be foreseen. Although MDC will likely close the books on a money-losing year in 2008, the undisclosed performance objectives were indeed met, and Mizel and Mandarich received the consolation payout, worth more than $4 million apiece.

MDC "respectfully decline(d) to participate" in this column, so I'll mention 2008's high points: The company had positive operating cash flow, thanks in part to large staff reductions, and ended the third quarter with about $1.4 billion in cash. The stock decline of 16.3 percent pales next to that of home builders that fell 30 percent to 50 percent, or who sank into bankruptcy.

So MDC, ultimately, was one of the best of a bad bunch. But in a year when both a company and its investors lost money, it's fair to ask whether MDC can ever have a year bad enough to make Mizel and Mandarich go home with no bonus.

David Milstead and James Paton take turns writing Up and Down 17th Street.