The Canadian and U.S. courts on Friday ruled that telephone-gear maker Nortel Network is permitted to grant eight top executives bonuses worth 7.3 million Canadian dollars (US$ 5.9 million), even as the company reels under severe bankruptcy.

The ruling came to the dismay of 60 former employees, who were recently sacked without severance packages under the terms of Nortel''s bankruptcy protection (acquired in January) and the company’s creditors.

The potential bonuses form part of a larger plan to pay 92 managers more than $23 million, including the eight executive members.

Besides, another 880 staffs may be paid as much as $22 million under a plan to ensure key workers don’t leave.

While defending its stance, Nortel argued that the payout to the eight executives was crucial to boost morale and to check the retention of the management team, as the company undertakes its restructuring plan.

The names of the executives remain undisclosed, but Nortel has already said chief executive Michael Zafirovski would not receive a bonus.

Toronto-based Nortel filed for bankruptcy in January in the U.S. and Canada after losing almost $7 billion since 2005. As a result, the company laid off at least 5,000 workers this year as part of a plan to reorganize as a smaller business.

In the wake of the gloomy world economy, executive bonuses have become a gut issue amongst investors and politicians. The news follows the controversial pay out of $165 million by the American International Group (AIG.N) after receiving $180 billion in government aid.

Nortel shares were unaltered at 10 Canadian cents on the Toronto Stock Exchange on Friday.