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Talbots (TLB) is making drastic cuts aboard the ship -- for everyone, that is, but the captain.

Shares of the women's apparel retailer plunged 13% to $6.13 in late-day trading Monday, following an announcement on Friday that the company will dole out $1.2 million to its CEO and President Trudy Sullivan.

The news came after the company cut 370 jobs, and announced plans to suspended its quarterly dividend and freeze its pension plan.

Talbots said the extra padding on Sullivan's pay check is to offset recent reductions in her retirement benefits. Last year she racked up a $1 million base salary, but her pay package also included about $931,000 in option awards, around $868,900 in value realized from past option grants, and $314,000 in "other" compensation that included $50,000 in financial consulting services and a $98,000 housing allowance -- for a total of $3.35 million.

So all those laid-off employees are probably pretty worried about the reduction in her retirement benefits.

Regardless, Talbots said in a Securities and Exchange Commission filing that it was required to offset Sullivan's decrease in benefits per her employment contract.

The company will also boost the annual salary of senior real estate and legal executive, Richard O'Connell, by 23%, bringing it to $500,000. He also received an extra 50,000 shares of restricted stock and an option to buy 74,000 shares of Talbots' stock, effective April 30.

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So where is Talbots getting the extra cash to pay Sullivan and O'Connell?

Earlier in the month the company said it

recorded a first-quarter loss

of $23.6 million, or 44 cents a share.

Talbots also announced that it finally

sold off its suffering J.Jill chain for $75 million.

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