CEO compensation is a hot topic, especially now that the Dodd-Frank Act requires say-on-pay votes. With CEO pay and performance seemingly disconnected at the following company, the Fool invites you to judge for yourself whether this business's boss actually deserves such a hefty paycheck.

Retail can be a tough sector. Even in good times, retail companies contend with cutthroat competition, fickle consumer tastes, and changing fashions. A lousy economy makes survival even more difficult.

Still, some retailers differentiate themselves as perennial underperformers in any environment. And when one of those companies hands big-time compensation to its CEO, you might be forgiven for wondering whether that leader actually deserves such a plentiful payday.

Talbots (NYSE: TLB) CEO Trudy Sullivan has led the classic retailer since mid-2007, when she was charged to "lead a complete turnaround and reengineering" of the company. Since then, I'd say that shareholders have instead experienced a complete disappointment.

The pay
For the last three years, Sullivan earned $1 million in annual base pay. In 2010, Sullivan's total pay was valued at a whopping $6.3 million, including stock awards, non-equity incentive plan compensation, and other items, up sharply from the $3 million in total compensation she reported the year before.

The sneaking suspicion that Sullivan might be overpaid doesn't come out of nowhere. Proxy advisory firms Institutional Shareholder Services (ISS) and Glass Lewis both recommended that shareholders vote against Sullivan's compensation at this year's annual meeting on May 19. Talbots issued a proxy statement amendment to defend the compensation ahead of the meeting.

Discussions of "peer" companies always add an interesting wrinkle to justifications for CEO pay. Among other retailers cited in comparison, Talbots mentioned Abercrombie & Fitch (NYSE: ANF). Its CEO, Mike Jeffries, was named one of the top 10 highest-paid CEOs in 2008 despite that retailer's underperformance at the time.

Many of the retailers on Talbots' list similarly trade in specialty clothing. But how alike is Talbots to high-end kitchen goods retailer Williams-Sonoma (NYSE: WSM), where total CEO pay in 2010 reached $13.6 million, or Tiffany (NYSE: TIF), the well-known, ultra-luxury jeweler, which paid its CEO a total of $9.2 million in 2010? Talbots listed both companies in its supposed peer pool.

Adding insult to injury, in June 2009 news broke that Sullivan had received $1.2 million to offset reductions to her retirement plan -- even as the company laid off rank-and-file workers and cut benefits. Was that poor move worth it? Or is Talbots' management more concerned with its own well-being than with the company's overall performance?

Speaking of performance…
Talbots hasn't increased annual sales since the fiscal year ended Jan. 28, 2006. Sullivan may have been hired to fix things, but the ensuing years' accelerating revenue declines suggest that her efforts aren't working. In the year ended January 2010, sales fell 17.4%, and same-store sales fell 19.3%. In the year ended January 2011, sales fell "just" 1.8%, but that's hardly inspiring after years of deterioration.

In fact, as much as Talbots has needed a turnaround, at least it was profitable on an annual basis before Sullivan took the helm. The company subsequently reported annual losses in fiscal 2008, 2009, and 2010. Its skimpy $0.11-per-share profit for the year ended Jan. 29, 2011, is hardly anything to celebrate. In comparison, in the year ended January 2006, Talbots actually reported an annual profit of $1.72 per share.

The company's compensation defense cites supposed accomplishments attributed to Sullivan, such as selling the struggling J. Jill, and reducing indebtedness through a rather strange transaction in which the company acquired a special purpose acquisition company, or SPAC. Talbots dubs this move "a comprehensive financing solution" that deleveraged its balance sheet. Granted, Talbots' debt-to-capital ratio did go from a horrifying 161.7% to 12.2% -- a positive for the company's survival. But all other things considered, those few achievements don't seem to justify Sullivan's high levels of pay.

Last but not least, how have long-term investors done? Since August 2007, when Sullivan took over the CEO role, Talbots' stock has lost almost 78% of its value, which works out to an average annualized return of -32.5%.

What now?
Talbots' annual meeting of shareholders took place on May 19, so if you own shares, you've likely already voted your proxy. The vote tallies have not yet been released, but they should be publicly disclosed anytime now, so be on the lookout for the results.

Even though the voting deadline has already passed this year, concerned shareholders can always contact the company's investor relations department and express displeasure at its CEO pay policies.

Join us tomorrow here on when we'll look at another CEO -- and ask whether they're worth their salary.