If a company fails to meet its financial goals, should executives have to return their bonuses?

This question is at the heart of a controversy surrounding several former top executives at Nortel Networks, with the company signaling it will take legal action to recoup the money if necessary, the New York Times reported.

On Tuesday, the Toronto-based telecom company released its highly anticipated-and often delayed-financial restatements for 2001 to 2003, with an internal probe pointing to executive manipulation to ensure bonuses, the Times reported.

In an unusual development, Nortel, the biggest maker of telecommunications equipment in North America, said that a dozen current executives who played no role in the manipulation would repay $8.6 million in bonuses voluntarily over three years. They will also give up the last two installments of a restricted stock payout dating back to 2003, the Times reported.

The audit showed the company earned $434 million, or 10 cents a share, in 2003, rather than $732 million, or 17 cents, as first reported. Revenue, though, rose to $10.2 billion from $9.8 billion. Financial reports for last year are to be filed later this month.

"We're close to the end (of the scandal), but we're not there yet," Nikos Theodosopoulos of UBS Investment Research told USA Today. "There are still no completed financials on '04."

Still ongoing are investigations by securities regulators as well as a tough business climate. The company's revenue stalled in 2004 and market share was lost to rivals, Theodosopoulos said.

The Nortel former executives are not the only ones under the gun to return bonuses. The Office of Federal Housing Enterprise Oversight is seeking to force a repayment of bonuses by two top executives ousted from Fannie Mae as a result of its accounting scandal, the Times reported. In another case, shareholder pressure caused the FPL Group to announce that it was recouping $22.5 million in bonuses given to eight executives as part of a failed merger agreement.