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Originally published Tuesday, April 2, 2013 at 2:50 PM

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JC Penny CEO 2012 pay package drops 97 percent

The CEO of struggling department store J.C. Penney saw his 2012 compensation package plummet nearly 97 percent to about $1.9 million without a sizeable stock award he got last year and no bonuses.

AP Retail Writer

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NEW YORK —

The CEO of struggling department store J.C. Penney saw his 2012 compensation package plummet nearly 97 percent to about $1.9 million without a sizeable stock award he got last year and no bonuses.

Ron Johnson, 54, received a base salary of $1.5 million, up from $375,000 which he received for a partial year after joining the company in August 2011, according to a Securities and Exchange Commission filing Tuesday. He did not receive any stock or option awards, compared with a stock award worth $52.7 million on the date it was granted in 2011. The award was given to Johnson after he was named CEO and made a $50 million personal investment in the company.

He also received $388,587 in other compensation, including contributions to savings plan and perks like personal use of company aircraft, home security systems and information technology services.

The Plano, Texas-based company said Johnson received 44 percent of his target cash compensation - his base salary only. Because the company reported an operating loss for the fiscal year of about $1 billion, no executives received any performance-based bonuses.

In 2011, Johnson succeeded Myron Ullman III, who had been at Penney's helm since December 2004. Under Johnson, J.C. Penney began a turnaround strategy that included getting rid of coupons and most of its sales events to focus on "everyday low prices," bringing in hipper brands such as Joe Fresh and Betsy Johnson and renovating outdated stores by installing mini-shops to replace undifferentiated racks of clothing.

Johnson, who was the mastermind behind Apple's chic streamlined stores, has a goal of reinventing J.C. Penney's business into a hip place to shop in a bid to attract younger, wealthier shoppers. But in the year since the plan has been rolled out, once-loyal customers have strayed from the chain and it hasn't been able to get enough new shoppers to replace them.

To turn around the business, J.C. Penney has backpedaled a bit. Last month it started sales again and brought back coupons. Still, some investors fear Johnson won't be able to stem the sales decline in time to finish transforming the stores.

The company's stock price fell 44 percent in 2012 and since then has fallen further, another 26 percent since the start of the year. It closed Tuesday at $14.55.

Discussing compensation, J.C. Penney said in a filing that fiscal 2012 was the first year of a "multi-year transformation strategy" for the company.

"The company underwent tremendous change as we began shifting our business model from a promotional department store to a specialty department store," the company said in the filing. "Fiscal 2012 was tougher than expected and the company's sales and operating profit declined significantly."

The Associated Press formula calculates an executive's total compensation during the last fiscal year by adding salary, bonuses, perks, above-market interest that the company pays on deferred compensation and the estimated value of stock and stock options awarded during the year. The AP formula does not count changes in the present value of pension benefits. That makes the AP total slightly different in most cases from the total reported by companies to the Securities and Exchange Commission.

The value that a company assigned to an executive's stock and option awards for 2012 was the present value of what the company expected the awards to be worth to the executive over time. Companies use one of several formulas to calculate that value. However, the number is just an estimate, and what an executive ultimately receives will depend on the performance of the company's stock in the years after the awards are granted. Most stock compensation programs require an executive to wait a specified amount of time to receive shares or exercise options.

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