L'Oreal Chief Executive Jean-Paul Agon pledged to hand back half the stock options he received in 2010 and halt the French company's use of them altogether, in an interview with French weekly Le Journal du Dimanche.

The world's largest cosmetics maker will switch this year to more transparent and less uncertain performance incentives by instead granting free shares to managers when goals are met, the newspaper quoted Agon as saying.

The L'Oreal boss also responded to criticism of his 10.7 million euro (£8.88 million) payout for 2010, amid renewed public scrutiny of executive salaries spurred by Europe's economic downturn and a presidential election campaign in France.

The compensation figure, published this week by shareholder advisory firm Proxinvest, was based on a 6.8 million euro valuation of his 400,000 stock options, Agon said. The figure doesn't mean anything because it depends on the share price when I exercise the options.

The L'Oreal chief nonetheless plans to return half of the options and keep 200,000 in order to share a performance dynamic with our stockholders, he said.

(Reporting by Laurence Frost; Editing by Andrew Heavens)