Executive pay and Commercial Real Estate and Compensation and Public Companies and Simon Property Group and David Simon and Real Estate & Retail

Simon CEO lands $137 million in compensation

April 10, 2012
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Simon Property Group CEO David Simon's total compensation ballooned to an eye-popping $137.2 million last year, thanks to a new eight-year employment agreement, the company disclosed in its annual proxy statement.

As IBJ reported in July, David Simon must remain CEO of the world’s largest mall owner for at least six years to see any of the $120 million in special stock awards that the company’s board of directors awarded him last year, and he must stay on eight years to reap the full amount.

The agreement propels Simon, 50, into the stratosphere of executive compensation. In 2010, the highest-paid CEOs in the country were Viacom’s Philippe Dauman, who received total compensation of $84.5 million, including special stock awards, and Occidental Petroleum’s Ray Irani, who received $76.1 million.

In a lengthy rationale for the award, the compensation committee of Indianapolis-based Simon Property’s board of directors said David Simon has been offered jobs in other industries that would pay him far more than he had been making as leader of the company founded by his late father Melvin Simon and uncle Herb Simon.

David Simon received total compensation of $24.6 million in 2010 and $4.6 million in 2009. Without the special stock award last year, his compensation would have been $17.2 million, a 74-percent decline from the previous year.

“Given David Simon's vast experience, track record as a chief executive and relatively young age, he has had (and prior to the new arrangement, could have pursued) employment opportunities outside our company and in different industries,” wrote the compensation committee members, specifically citing private equity and investment banking. They added, “the committee considered the need for new and creative retention and compensation arrangements that could reflect David Simon's contributions and secure a long-term commitment from him to remain with us.”

The compensation committee members are Al Hubbard, CEO of Indianapolis-based buyout firm E&A Industries; Dan Smith, dean of the Indiana University Kelley School of Business; Melvyn Bergstein, former chairman of the Chicago-based management advisory firm Diamond Management & Technology Consultants Inc.; and Reuben Leibowitz, managing member of the New York-based private equity firm JEN Partners.

David Simon, who is chairman of the company’s board, negotiated with the compensation committee for 18 months before the new employment agreement was signed. The deal also includes a guaranteed salary of at least $1.25 million each year, annual stock awards equal to at least $12 million, and cash bonuses, based on performance targets, designed to yield double Simon’s annual salary.

In describing the new employment deal, the compensation committee gushed about Simon Property’s achievements under David Simon, who has been the company’s CEO since 1995.

“Our performance under David Simon's tenure as CEO over the past 17 years has been remarkable and unmatched within our industry,” the committee declared, adding, “His leadership has been integral to our record of performance. The company's equity market capitalization has increased from $2 billion in January 1995, when he was appointed CEO of the company's predecessor, to over $45.8 billion as of December 2011.”

David Simon has also led Simon Property’s significant international expansion, with malls in Europe, Japan, Malaysia, Mexico, South Korea and Puerto Rico. And on Monday, the company announced a new joint venture to open outlet malls in Brazil. Simon owns a total of 337 retail properties nationwide, employing 5,500 people.

The committee concluded its rationale for Simon’s special award by stating, “The decision was subjective and not determined by reference to any peer group or formula.”

Simon Property's four other top executives saw their total compensation fall in 2011 compared with 2010, when special stock awards lifted pay totals by roughly fivefold over 2009. The value of the Simon Property stock awards in 2011 were smaller than the previous year, but still much larger than in 2009.

Company President Richard Sokolov saw his total compensation fall 23 percent, to $8.6 million. Chief Financial Officer Steve Sterritt took home $6.7 million, about 26 percent less than the previous year. General Counsel James Barkley received compensation of $6.9 million, a 30-percent decline over the previous year. And Chief Administrative Officer John Rulli received $3.4 million, a decline of 47 percent from 2010.

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