Who is at fault as these issues and, most importantly, the issue of Avon’s financial performance, which has undermined the firm’s stock price and reputation? The board of directors.

The Avon board is an odd mix of people, some of whom are hardly qualified to sit in their positions. The board’s lead director, Fred Hassan, who should have been at the forefront of solving Avon’s management problems, has been much too slow in carrying out his duties. He has been a director as long as Jung has been CEO. He has been in a position to watch all of the firm’s troubles unfold and did nothing until he and others forced Jung out.

Maria Lagomasino, a private banker, has been on Avon’s board since 2000. It is hard to see how someone with her background has any reason to be involved with governance at a large public company. Don Cornwell has been on the board since 2002. He is a former radio executive. Paul Pressler, who was dismissed as the CEO of Gap (NYSE: GPS), is also on the board. His turn as the head of a public retail firm ended badly.

There are few precedents of public boards that have been dysfunctional as long as Avon’s. The best example may be Hewlett-Packard (NYSE: HPQ), where the board stumbled and bumbled for years. The tech company hired former eBay (NASDAQ: EBAY) CEO Meg Whitman. Many of the HP board members have left recently. The pressure for them to do so has existed for some time. It is remarkable that the board took so long to do what it should have long ago — bring in appropriately experienced directors.

The changes in Avon management have not been accompanied by changes on the board. Until they are, the reasons to trust that the company’s many problems can be fixed are nonexistent.

Douglas A. McIntyre

Honda (NYSE: HMC) posts a 65% drop in profits and cuts its outlook because of the yen and Thai floods. (Reuters)

Twenty-five nations, led by Germany, sign a bailout fund agreement. (Reuters)

Honda will launch its first business jet next week. (Reuters)

Research In Motion (NASDAQ: RIMM) independent directors agree that the chairman should not be a company executive. (Reuters)

German retail sales fall in December. (Reuters)

The WTO rules against Chinese policies on raw materials, but its rare earth exports are not addressed. (Reuters)

AT&T (NYSE: T) changes the roles of a number of its top managers. (Reuters)

Another director — Larry Babbio Jr. — leaves the Hewlett-Packard (NYSE: HPQ) board. (Reuters)

New 401(k) rules could help millions of American with savings. (WSJ)

State attorneys general have until the end of the week to join a bank mortgage settlement set by the federal government. (WSJ)

Banco Santander’s (NYSE: STD) profits drop 98% on its real estate holdings. (WSJ)

The vice chairman of Avon Products (NYSE: AVP) loses his job over an overseas bribery probe. (WSJ)

Symphony IRI reports that more shoppers are moving to store brands and away from traditional ones. (WSJ)

RadioShack (NYSE: RSH) shares fall on a profit warning. (WSJ)

Portugal’s borrowing costs rise to euro-area highs. (WSJ)

The Manhattan Institute reports racial segregation reached a 100-year low. (WSJ)

Verizon’s (NYSE: VZ) home broadband efforts compete with Verizon Wireless products. (WSJ)

Groupon’s (NASDAQ: GRPN) CEO defends the value of the company’s shares. (WSJ)

Starbucks (NASDAQ: SBUX) moves into India. (WSJ)

Pep Boys goes private. (WSJ)

Comscore reports that Facebook increased its display market share lead over Yahoo! (NASDAQ: YHOO) and Microsoft (NASDAQ: MSFT). (WSJ)

Many European companies begin to prepare for the economic fallout of a troubled Europe. (WSJ)

Moody’s says it was unaware of balance sheet risks taken by MF Global. (WSJ)

BSkyB will launch an online TV service. (NYT)

The Treasury Department investigates whether Freddie Mac invested based on an inability of some Americans to refinance their homes. (NYT)

A bill to curtail insider trading in Congress advances. (NYT)

EU banks may take loans of as much as $1 trillion because of financial trouble in the region. (FT)

Strong R&D and innovation can extend the life cycles of technology companies. (FT)

Greece is near a confrontation with the European Union over a rescue. (Bloomberg)

German unemployment fell more than expected in January, according to the Federal Labor Agency. (Bloomberg)

Portugal will sell more assets to help with its national debt reduction. (Bloomberg)

Douglas A. McIntyre

By most estimates, improvement in Standard & Poor’s 500 earnings growth stumbled in the fourth quarter. S&P 500 Index companies may have earned just $24.74 a share in the quarter, according to analysts’ estimates compiled by Bloomberg as of January 6. That is worse than in any period since the September 2009 quarter.

Unemployment rose sharply from late 2007 through 2009, and in some quarters, since 2010. Most estimates put total jobs lost at eight million in America. The losses were spread broadly. Government statistics show that unemployment rose in 45 of the 50 states. Some of the “downsizing” occurred at small companies caught in cash squeezes. Data from research firms like Challenger Gray show that the America’s largest companies were busy firing as well.

As far as senior management at S&P 500 companies are concerned, all good things must come to an end. Downsizing has reached its limits at many firms as the productivity of those workers left is stretched to the maximum. Earnings can no longer be enhanced by traditional cost cuts.

Any argument that the U.S. economy has become decoupled from Europe’s is false, at least as far as American company earnings are concerned. Corporations from Intel (NASDAQ: INTC) to General Motors (NYSE: GM) say they face earnings problems in Europe. And, by extension, China has been affected because of its reliance on exports to Europe. Profits from overseas operations will not bolster S&P 500 bottom lines in either Europe or Asia.

Poor management was abundant in the last part of 2011. The was true particularly at very big companies like Cisco (NASDAQ: CSCO), Hewlett-Packard (NASDAQ: HPQ), Avon (NYSE: AVP), Eastman Kodak (NYSE: EK) and Macy’s (NYSE:M). It was also abundant at emerging firms like Netflix (NASDAQ: NFLX).

Those things that caused poor earnings growth in the final quarter of 2011 have not gone away. Some, like the trouble in Europe and the loss of ability to downsize further, will not go away. The start of 2012 will be just as tough for earnings growth as the end of last year.

Douglas A. McIntyre

Read the ten best online stores this holiday
Read the ten worst online stores this holiday 

To put those customer service rankings in context, we looked at how the parent companies that own the websites have performed recently.  We found that a strong customer service rating often coincides with a company that has widely regarded brands.

It begs the question: Does Apple (NASDAQ: AAPL) have such a high customer service ranking because so many consumers love the Apple brands? Or, is Apple’s customer service for online shoppers really superior to that of other e-commerce businesses? Apple is tied for second place in the index. Amazon.com is in first place. It also has a sterling reputation with consumers, as do some of its major products like the Kindle.

At the bottom of the ForeSee index are Gap (NYSE: GPS), Sony (NYSE: SNE) and Overstock (NASDAQ: OSTK). Gap recently said it would close 21% of its U.S. flagship stores. Sony has had trouble gaining sales for its PCs, games, smartphone and TV products. Overstock, an also-ran online department store, was founded in the days of the dial-up internet. It is hard to see how any of these could be at the top of the list. Or, perhaps if they were at the top of the list, they would not be in such deep trouble now.

ForeSee’s E-retail Satisfaction Index included the top 40 retailers by sales. The company surveyed 8,500 customers between Thanksgiving and Christmas. Despite its shortcomings, 24/7 Wall St. used the data from ForeSee as a foundation, because it is a reasonable measurement of the experience that consumers have with specific e-commerce sites, whether those sites are part of highly successful companies or ones on the verge of failure.

There is also some evidence that a few troubled retailers have actually performed well online. Whether that success is enough to save the companies themselves is impossible to tell. One such example is Avon (NYSE: AVP), with online service that is tied for second among all e-commerce sites in the ForeSee index. But Avon recently posted a disastrous quarter, and its CEO of 12 years was dismissed. Similarly, JCPenney’s (NYSE: JCP) online operations’ customer satisfaction is equal to Apple’s, which is also tied for second place in the ForeSee rankings. However, JCPenney has lost sales to big-box retailers such as Walmart (NYSE: WMT) for years. It is worth noting that JCPenney just hired the head of retail stores at Apple to turn the bricks-and-mortar retailer around. Apple is one of the few companies that was successful online long before it began to build physical stores.

These are the the companies with the best and worst online customer satisfaction. To draw our conclusions about why they are on the list and what the relationship is between the companies and their e-commerce operations, we examined three factors: the ForeSee satisfaction data, the annual sales of each of the companies, and the amount of traffic each site had in November — the most recent month measured by audience research firm Compete.com. Foresee describes its rating as “Average customer satisfaction with the top 40 U.S. e-retail websites increased by one point this year to tie 2009’s all time high score of 79 on the study’s 100-point scale. Satisfaction scores for individual e retailers span a 16-point  range, from a high of 88 (Amazon) to a low of 72 (Overstock).”

The unofficial closing bells put the DJIA down nearly 132 points to 11,823.48 (-1.1%), the NASDAQ fell nearly 40 points (-1.55%) to 2,539.31, and the S&P 500 fell -1.13% or nearly 14 points to 1,211.82.  So far this week, the indexes have closed lower every day.

There were several analyst upgrades and downgrades today, including General Electric (NYSE: GE) reiterated as ‘outperform’ with the target price raised to $22 at Credit Suisse. Other ratings actions today include Yahoo Inc. (NASDAQ: YHOO) restarted as ‘sell’ at Goldman Sachs; Yum! Brands Inc. (NYSE: YUM) reiterated as ‘buy’ and target price raised to $60 at Argus; Altria Group Inc. (NYSE: MO) cut to ‘hold’ at Stifel Nicolaus; and Avon Products Inc. (NYSE: AVP) raised to ‘outperform’ at BMO Capital. Groupon Inc. (NASDAQ: GRPN) received ratings from a slew of analysts this morning, and the results are in our full ratings coverage.

Here are today’s post-earnings news reactions with prices during the last half-hour of trading: Joy Global Inc. (NYSE: JOY) is down nearly -11% at $75.54 and Synovis Life Technologies Inc. (NASDAQ: SYNO) is up 0.2% at $27.83. Synovis received a buyout offer yesterday at $28/share from Baxter International Inc. (NYSE: BAX). Tomorrow’s big earnings releases come from Adobe Systems Inc. (NASDAQ: ADBE), Discover Financial Services (NYSE: DFS), and Fedex Corp. (NYSE: FDX).

Other standouts from today include the following stocks:

First Solar Inc. (NASDAQ: FSLR) is down more than -21% at $33.46, after posting a new 52-week low of $33.08 earlier today. The solar PV maker lowered guidance this morning. See our coverage here.

Avon Products Inc. (NYSE: AVP) is up almost 5.5% at $17.02. The cosmetics company is replacing CEO Andrea Jung. We have more on the story here.

eOn Communications Corp. (NASDAQ: EONC) is up about 108% at $2.12. The online marketing company reported good earnings yesterday, but not that good. Investors must be anticipating a buyout offer.

Silicon Graphics International Corp. (NASDAQ: SGI) is down nearly -17.5% at . The computer maker’s president/CEO has resigned, effective January 1st, to take a position as president and CEO at another company.

SunPower Corp. (NASDAQ: SPWR) is down more than -15% at $5.35, after posting a new 52-week low of $5.34. The solar maker is caught in the general sell-off of solar stocks following the lowered guidance from First Solar.

RADVision Ltd. (NASDAQ: RVSN) is down nearly -12% at $8.57. The communications equipment maker’s shares jumped more than 14% yesterday on talk of a buyout by Avaya. The falling share price is very likely discounting yesterday’s rumor.

Stay tuned for a busy Thursday. Here are some other noteworthy events on the schedule (all times Eastern):

• 8:30 a.m. – New unemployment claims report
• 8:30 a.m. – Producer price index report
• 8:30 a.m. – Empire State Manufacturing survey
• 9:15 a.m. – Industrial production report
• 9:45 a.m. – Bloomberg consumer comfort index
• 10:00 a.m. – Philadelphia Federal Reserve survey
• 10:30 a.m. – EIA weekly natural gas report
• 1:00 p.m. – 5-year TIPS auction
• 4:30 p.m. – Federal Reserve balance sheet and money supply report

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Paul Ausick

Altria Group Inc. (NYSE: MO) Cut to Hold at Stifel Nicolaus.
Avon Products Inc. (NYSE: AVP) Raised to Outperform at BMO Capital Markets.
Celanese Corporation (NYSE: CE) named as Bull of the Day at Zacks Investment Research.
China Life Insurance (NYSE: LFC) maintained as Underperform but named the Bear of the Day by Zacks Investment Research.
Estee Lauder Companies (NYSE: EL) Added to Strong Buy List at Zacks Investment Research.
Fifth Third Bancorp (NASDAQ: FITB) Cut to Market Perform at Bernstein.
General Electric Co. (NYSE: GE) Reiterated Outperform and raised estimates at Credit Suisse.
Mitcham Industries, Inc. (NASDAQ: MIND) named as value stock of the day at Zacks Investment Research.
Vertex Pharmaceuticals (NASDAQ: VRTX) Raised to Outperform but cut the price target to $37 from $39 by Credit Suisse.
Yahoo! Inc. (NASDAQ: YHOO) resumed with a “Sell” rating at Goldman Sachs.
YUM! Brands Inc. (NYSE: YUM) Reiterated Buy and raised price target to $66.00 by Argus.

The big move in the land of stock research and analyst calls is the expiration of the Groupon, Inc. (NASDAQ: GRPN) quiet period.  The online social couponing site was initiated in coverage as follows by some of the syndicate firms:

• Overweight and $27.00 price target at Barclays;
• Buy with $28.00 price target by Bank of America/Merrill Lynch;
• Neutral and $24.00 price target at Citigroup;
• Neutral with a $25.00 price target at Credit Suisse;
• Buy with a $29.00 price target by Goldman Sachs;
• Neutral and $24.00 price target at JPMorgan;
• Sector Perform with $25.00 price target at RBC Capital Markets.

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Jung’s public image has been positive recently. She was named to a number of top female CEO lists and held up as an example of how far women have come in business. The latest compliments were all given in a period when Avon was in desperately poor shape.

Avon’s share price is down more than 50% in the past two years. Despite recent poor earnings, bribery changes in some of the company’s overseas operations, and an SEC investigation into whether an Avon official made confidential comments to an analyst, Jung made $13.2 million last year. That is up from $9.5 million in 2009.

Fred Hassan, Avon’s lead director who has served since 1999 when Jung became CEO, must take a great deal of the criticism for how long the chief executive held her job as the company faltered. Nearly equal blame can be placed with long-time directors Ann Moore, Paula Stern and Lawrence Weinbach, who have been members since the 1990s. Each has watched the company get into greater trouble. Each can compare the past two years to those during which Avon did much better.

Avon’s board will not disclose its recent discussions about Jung. It does not have to. The lengths to which the board will go to cover its own decisions was evident in comments made when news that Jung would step down was released:

Fred Hassan, Managing Director and Partner, Warburg Pincus LLC, and Avon’s Lead Independent Director added: “Avon’s Board of Directors fully supports Andrea and appreciates her commitment to continue to serve the company as Executive Chairman and assure a smooth and successful management transition. Separating the Chairman and CEO roles as well as strengthening overall management capabilities are important steps to help the company capture its future opportunities. The Board looks forward to continuing to work closely with Andrea and the new CEO to put the company back on a growth track.”

No mention is made of how badly Jung damaged Avon.

Douglas A. McIntyre

Dunn has been CEO since June 2009. Best Buy has posted a string of poor quarterly results since then. When it released earnings for the period that ended November 26, Wall St. was so shocked by the company’s results and forecasts that it drove Best Buy shares down more than 15%.

Dunn was bold enough to try to make what was a disaster into a positive development. He said in the earnings release:

I’d like to thank our employees around the world for their tireless efforts during the third quarter and a successful kickoff to the holiday selling season. We took actions to provide value to customers and drive our business in this competitive consumer environment. We are pleased to report positive traffic, comparable store sales growth and continued progress on our key strategic focus areas, highlighted by strong performance online.

There is little or no factual support for the comments. Amazon.com (NASDAQ: AMZN) continues to badly damage Best Buy’s earnings and its future projects. Best Buy has been unable to overcome that.

As evidence of investor reaction to the CEO’s tenure, Best Buy’s shares are off 43% over the past two years. Amazon’s are higher by 39%, and the S&P 500 is up 12% over the same period.

One of the greatest problems Best Buy shareholders face is a board run by the company’s founder, who appears to have acted as he pleased during Dunn’s tenure. Richard M. Schulze founded Best Buy and the company’s predecessor company, The Sound of Music, in 1966. Schulze holds nearly 18% of Best Buy’s shares. The most positive thing that can be said about Dunn’s tenure is that Schulze has lost a great deal of money as he has supported his CEO.

Dunn is a perfect example of a chief executive who has performed so badly and he has been in his position far too long to benefit shareholders. The best thing that could happen to Best Buy is that he be replaced with a retail executive who might turnaround the firm’s bricks-and-mortar and online operations.

Douglas A. McIntyre

Accounting problems at Olympus may make it a takeover target. (Reuters)

Italian bond yields hit a eurozone record. (Reuters)

Avon Products (NYSE: AVP) replaces its CEO. (Reuters)

China vows to keep its economy growing despite difficulties elsewhere. (Reuters)

HTC says a ruling on IP issues with Apple (NASDAQ: AAPL) has been delayed. (Reuters)

The euro hits an 11-month low. (WSJ)

Olympus restates earnings. (WSJ)

Best Buy (NYSE: BBY) earnings come in below expectations, due in part to competition with Amazon.com (NASDAQ: AMZN). (WSJ)

General Electric (NYSE: GE) will find its earnings undermined in Europe. (WSJ)

The head of AMD (NYSE: AMD) plays down parts shortages after Intel (NASDAQ: INTC) warns on earnings. (WSJ)

The National Transportation Safety Board calls for a ban on cellphone use and text devices in cars. (WSJ)

A fight about payroll taxes delays the federal budget bill. (WSJ)

California must make $981 million in mid-term budget cuts. (WSJ)

Chrysler’s CEO says the company could make a $3 billion operating profit next year. (WSJ)

Morgan Stanley (NYSE: MS) must return about $700 million to investors in its flagship global real-estate fund.  (WSJ)

MBIA (NYSE: MBI) will pay Morgan Stanley $1.1 billion to settle allegations of selling guarantees on real estate. (WSJ)

Commerzbank may have too small a capital reserve if eurozone financial problems worsen. (NYT)

The Organisation for Economic Co-operation and Development says members must defend internet freedoms. (NYT)

International Monetary Fund officials urge more austerity for Greece. (NYT)

EU officials say the a new treaty already is beset by political arguments. (FT)

GE’s Immelt says the company could have double-digit growth if its industrial operations do well. (FT)

EBay’s (NASDAQ: EBAY) PayPal will challenge Groupon (NYSE: GRPN) and LivingSocial. (Bloomberg)

Members of OPEC, including Iran and Saudi Arabia, agree the group should set a production ceiling of 30 million barrels a day.  (Bloomberg)

Douglas A. McIntyre

In a statement, Avon’s board remarked,

that  Andrea Jung ,  Avon ‘s Chairman and CEO, will be named Executive Chairman, and that a committee of the Board of Directors will work with Ms. Jung to undertake an external search for a Chief Executive Officer.

In its evaluation of Avon, 24/7 Wall St. wrote:

Avon’s (NYSE: AVP) management has taken one of the greatest franchise operations in the world and nearly ruined it. The company has bungled its move into markets like China, where the company faces a bribery probe. Revenue growth in emerging markets, such as Brazil and Russia, has faltered. When it announced third-quarter earnings, Avon said it could no longer support its guidance for the balance of the year. The news caused several analysts to downgrade the company’s financial prospects and its stock. CEO Andrea Jung said Avon would continue to seek solutions through another of her interminable restructurings of personnel and operations. Just after Avon announced financial results, it disclosed an SEC investigation into improper contacts between the company’s management and Wall St. analysts.

Douglas A. McIntyre