Ron Johnson's Stunning 97 Percent Pay Cut Shows Why Execs Should Fear Turnarounds

Ron Johnson came to JC Penney with a sterling reputation from masterminding the Apple Store and transforming Target. The hire sparked hope for the company, which was already in serious trouble.

That celebrity status, the company's dire straits, and heavy recruitment from hedge fund manager Bill Ackman, who owns a large percentage of JCP, meant that hiring Johnson cost a lot. He received a massive $52.7 million stock grant on his hiring.

The hiring was well received by Wall Street, and Johnson made sweeping changes in strategy and staffing.

What a difference a year makes.

This year, Johnson got no stock, no bonus, and saw his base pay cut, according to JC Penney's proxy filing. The overall drop in his compensation was an incredible 97 percent, due, according to the filing, to the disconnect between the company's performance and Johnson's high goals. Most of that drop comes from the sheer size of his initial stock bonus, but his pay is notably low, at around $1.9 million. Because he missed incentives, Johnson only earned 44 percent of his targeted cash compensation.

That's what happens when the stock declines almost 60 percent, same-store sales drop a staggering 32 percent over a year, there are genuine questions about the company's core strategy, and an initiative key to the company's turnaround has been watered down and may yet be killed by a legal challenge.

Everybody loves a good turnaround story. That's why Steve Jobs is a legend, Starbucks CEO Howard Schulz is highly regarded, highly compensated Ford CEO Alan Mulally got a $34 million dollar bonus last year (on top of nearly $29 million in total pay this year), and Nissan/Renault head Carlos Ghosn has a Japanese comic book about his exploits as a manager.

That status, and the rewards that come with it, can be incredibly alluring.

But for every success story we remember and celebrate, there are plenty of huge failures, like Carol Bartz at Yahoo or Léo Apotheker at HP, who left their companies worse off than when they took over, and damaged their own reputations.

They might still come back to lead another company, but it's hard to argue that Bartz's tenure at Yahoo didn't overshadow some of the great work she did at Autodesk.

High profile executives shouldn't let the possibility of glory blind them to the reality of how hard a turnaround is, especially for a big-box retailer that faces massive challenges. And as successful as Johnson has been, neither Apple or Target had been in such bad shape as JC Penney.

Reputation alone can't turn around a business. But it can set expectations incredibly high. Johnson didn't do much to manage them.

That may make the fall even harder.