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Avon's CEO got no cash bonus in 2005

The world's largest direct seller of beauty products also laid out plans for executive incentives for 2006 and 2007 based on the company's turnaround efforts.

Chairman and Chief Executive Andrea Jung's annual salary was set at $1.375 million in March 2004.

The compensation committee of Avon's board said in January that Jung and other officers should not get bonuses for 2005 because the company did not satisfy its performance measures.

Avon, whose brands include Anew and Skin-So-Soft, has pegged 2006 as a transitional year as it works to improve its results.
Avon unveiled a restructuring plan in late 2005 that includes cutting 20 percent to 30 percent of its management jobs, increasing advertising spending, and exiting some operations. The company was pressured last year as lower-income consumers curbed purchases and competitors rolled out new skincare products.

Jung's incentive bonus target for 2005 was 175 percent of her base salary and was linked to certain performance objectives under an executive incentive plan. Due to the company's performance, she did not receive a bonus under that plan. In 2004, her bonus under the executive incentive plan was just over $2.3 million.

Jung was awarded a stock option grant of 675,000 shares in March 2005. Those options vest in three equal annual installments that began on March 10, 2006. Options awarded to Jung accounted for 9.2 percent of all of the options Avon granted to its employees in 2005, according to the company's filing.

Including the stock options, perquisites such as financial planning and other personal benefits, Jung's total compensation in 2005 was $7,630,017.

As disclosed in January, the only 2005 bonus awarded at the executive level went to Gilbert Klemann II, Avon's general counsel, who received a cash bonus of $30,000. His bonus in 2004 was $336,995.

Avon said that on March 27, its board's compensation committee set the 2006 annual cash bonus performance goals.
The committee also approved a 2006-2007 turnaround incentive plan to focus key executives on new objectives. Actual payouts under that plan go up to 200 percent of the target award, depending on whether operating profit measures and initiatives under Avon's turnaround plan are met. Target awards were set at 67 percent of the average of earned base salary for 2006 and 2007.

The committee also approved a grant of equity-based awards for Jung, effective March 31. The grant is equivalent to 500 percent of her base salary, with 50 percent in stock options and 50 percent in restricted stock units. The restricted stock units fully vest on the third anniversary of the grant date, as long as cumulative revenue and operating profit performance measures are met from fiscal 2006 through 2008, Avon said.