Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



Breaking Up and Making Up at Avon

Don't let it get away!

Keep track of the stocks that matter to you.

Help yourself with the Fool's FREE and easy new watchlist service today.

Avon Products (NYSE: AVP  ) announced plans to ditch Andrea Jung as CEO this week, but this big breakup isn't too terribly ugly. Avon's board has made it up to her pretty nicely given the fact that she'll remain on the payroll as executive chairman.

Payday still applies
Jung will be entitled to a $1 million annual base salary. She'll also be eligible for a discretionary cash bonus based on the board's assessment of her performance and success during the transition period to a new, separate CEO; the target award is equal to 100% of base salary.

She'll continue to participate in Avon's three-year long-term incentive program, with an annual target award equal to 400% of annual base salary after 2012. She'll remain covered by the company's executive retirement and death benefits plans, as well as by the medical, dental, life and disability insurance, 401(k) plan, pension plan, and so forth.

According to the regulatory filing, Jung's potential severance benefits and potential change of control benefits have been "significantly reduced" from those under her previous employment agreement.

Incidentally, Jung's new base salary as executive chairman isn't far off from her annual pay as chairman and CEO (last year, her base salary was $1,375,000).

Parting's sweet sorrow (and sweet payouts)
Earlier this week, Avon shares surged on the plans for a new CEO next year, but it seemed prudent to wait past that initial euphoria to see what kind of consolation prize Jung might get. The golden parachute is always the other side of the story when a CEO leaves the helm, since it represents shareholder money.

Jung's compensation for her stripped-down chairman role isn't as shocking as what transpired at Nabors Industries (NYSE: NBR  ) recently; Eugene Isenberg was relieved of the CEO post and given the chairman title, still triggering a clause in his employment agreement entitling him to $100 million in severance.

Meanwhile, Talbots (NYSE: TLB  ) recently announced the retirement of Trudy Sullivan (nominated as one of the Worst CEOs of 2011 -- and arguably many other years, too); her handsome golden parachute totals $5 million plus additional ongoing perks, even though her tenure won't go down in history as much of a success.

Avon's makeover has just begun
Jung's situation seems mixed from the shareholder perspective. As much as it's great to see separate individuals in the chairman and CEO roles, I'd rather see an independent chairman, not a former member of management, and of course, this seems like an awfully expensive way to go about separating those roles. On the other hand, despite the last several years' lackluster results, Jung has served as Avon's CEO since 1999, and is credited with several important changes to the business. Avon shareholders could have experienced a far costlier (and less productive) exit.

Regardless of anything else, though, investors who bid Avon shares up earlier this week were more than a little bit premature. Avon has formidable competition from the likes of Procter & Gamble (NYSE: PG  ) and Revlon (NYSE: REV  ) , and hasn't been a winning stock compared to, say, cosmetics giant Estee Lauder (NYSE: EL  ) . (This time last year, my Foolish friend and colleague Dayana Yochim and I panned Avon, and picked Estee Lauder as a better cosmetics stock.) In other words, Avon and Andrea Jung may be breaking up and making up, but investors should still wait for better clarity before adding this one to their portfolios.

What do you think? Is Avon suddenly, magically a fresh investment idea? Let us know in the comments box below, or add Avon Products to My Watchlist to keep track of coming developments.

Alyce Lomax does not own shares of any of the companies mentioned. Motley Fool newsletter services have recommended buying shares of Procter & Gamble. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Read/Post Comments (0) | Recommend This Article (6)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1743915, ~/Articles/ArticleHandler.aspx, 10/25/2016 10:19:15 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 1 hour ago Sponsored by:
DOW 18,169.27 -53.76 -0.30%
S&P 500 2,143.16 -8.17 -0.38%
NASD 5,283.40 -26.43 -0.50%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

10/25/2016 4:01 PM
AVP $6.89 Up +0.06 +0.88%
Avon Products CAPS Rating: *
EL $86.18 Down -0.45 -0.52%
The Estee Lauder C… CAPS Rating: **
NBR $12.77 Down -0.27 -2.07%
Nabors Industries CAPS Rating: ****
PG $86.97 Up +2.87 +3.41%
Procter and Gamble CAPS Rating: ****
REV $35.30 Up +0.25 +0.71%
Revlon CAPS Rating: No stars
TLB.DL $0.00 Down +0.00 +0.00%
The Talbots, Inc. CAPS Rating: *