IBJNews

Shareholder group advises against Simon CEO bonus pay

Back to TopCommentsE-mailPrintBookmark and Share

Simon Property Group Inc. is firing back at a corporate governance advisory firm that recommended Simon shareholders vote against a $120 million retention award for CEO David Simon.

Institutional Shareholder Services Inc. argues in a 20-page report issued May 1 that the employment agreement's incentive award "lacks performance conditions" and creates the potential for "pay-for-failure" since it requires only that Simon remain at the company, not that he continue performing at a high level.

Simon, 50, would have to remain as CEO of the world's largest real estate company through 2019 to collect the entire $120 million in special stock awards; he's entitled to collect the payout in thirds starting in 2017. His new employment agreement, signed in July, also calls for Simon to earn a minimum $1.25 million per year, a targeted cash bonus of double his salary, and annual stock awards worth at least $12 million.

That adds up to $30.8 million per year, ISS wrote, a sum that's about three times the median pay for "similarly situated peers." ISS said the board makes a "strong case" that Simon's service is vital to the company's future, but concerns remain.

"While currently the company's performance may warrant high pay, the bulk of the opportunity is subject to no performance conditions and the board has no discretion to adjust its incentive approach for the next eight years," ISS wrote. "It cannot add performance conditions to the retention award or adjust the mix of equity and nonequity incentives."

ISS also recommends shareholders vote against adding 6 million additional shares to an existing stock incentive plan for top Simon executives, but it suggests votes in support of the company's slate of board members. The say-on-pay vote, scheduled for the company's annual meeting May 17 at its Indianapolis headquarters, is advisory only and nonbinding.

In a letter to shareholders, Simon said ISS' recommendation ignores the company's size, growth and performance compared to peers.

The letter notes several performance metrics the company attributes to David Simon: a 10-year return of 597 percent compared with 58 percent for the Standard & Poor's 500; the highest investment grade rating among public U.S. retail real estate firms; and a jump in equity market value during Simon's tenure from $2 billion in 1995, when he took over as CEO, to $57 billion on May 3.

The company this year joined the Standard & Poor's 100 Index, a listing of the nation’s largest and most established companies, including Apple, Coca-Cola and McDonald’s.

"Our long-term record of creating stockholder value leads our industry and is among the best in all of corporate America," the company said in its shareholder letter, a copy of which it filed with the SEC. "This value creation is directly and demonstrably a result of David Simon's leadership. He is recognized as the best CEO in our business and that is why your board of directors believed it was critical to retain [him] for the foreseeable future."

The company noted that more than 90 percent of David Simon's annual target compensation will continue to be "at-risk" and realized only if Simon sticks around and the company's stock price continues to rise.

ISS classifies the $120 million retention award as part of Simon's 2011 pay, for a total of more than $137 million on the year, giving him a payday that's 12 times the median level of peer CEOs.

But Simon disagrees with the firm's intepretation, saying it will account for the award over the eight years of the contract.

The company's compensation committee, in explaining the rationale for the award, said David Simon had 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.

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.”

That's a problem in the eyes of ISS.

"The reason given by the compensation committee for the retention award is the board's confidence that Mr. Simon's leadership is necessary for the future success of the company," ISS wrote. "It follows that the future success of the company should be a condition for the significant payment that is required to secure his continued service."

ADVERTISEMENT

Post a comment to this story

COMMENTS POLICY
We reserve the right to remove any post that we feel is obscene, profane, vulgar, racist, sexually explicit, abusive, or hateful.
 
You are legally responsible for what you post and your anonymity is not guaranteed.
 
Posts that insult, defame, threaten, harass or abuse other readers or people mentioned in IBJ editorial content are also subject to removal. Please respect the privacy of individuals and refrain from posting personal information.
 
No solicitations, spamming or advertisements are allowed. Readers may post links to other informational websites that are relevant to the topic at hand, but please do not link to objectionable material.
 
We may remove messages that are unrelated to the topic, encourage illegal activity, use all capital letters or are unreadable.
 

Messages that are flagged by readers as objectionable will be reviewed and may or may not be removed. Please do not flag a post simply because you disagree with it.

Sponsored by
ADVERTISEMENT

facebook - twitter on Facebook & Twitter

Follow on TwitterFollow IBJ on Facebook:
Follow on TwitterFollow IBJ's Tweets on these topics:
 
Subscribe to IBJ
  1. Good Day I am Mr (Victoria Wright) from United state of America, i stayed in NEW YORK, and i have a broke up business, until i found this company email who help me to gain a loan for business,, and now i want to used this short medium to congratulate the below company for the fast and safe money they loan to me without any form of collateral, i loan 500,000USD from the company to save my business and lots more, i saw their mail on the internet, everyone always give testimony for what they did, so i quickly contacted them and they all did everything for me without stress and my money was sent to my account just 3 days later, i was surprise and i feel so glad, now i have a standard business control agent who help me, now i will advice those who need urgent loan to contact him at the bellow email:zenithfirm12@gmail.com

  2. NOTICE:This is to inform the general public that Vampires are real. My name is James Franklyn.,am an agent of vampire,am here to introduce our new world trend to you,a world of vampire where life get easier,we have made so many persons vampires and have turned them rich,you will be assured long life and prosperity,you shall be made to be very sensitive to mental alertness,stronger and also very fast,you will not be restricted to walking at night only even at the very middle of broad day light you will be made to walk.In case you are wildly oppressed by some unscrupulous persons we can still help you fight them.Your protection is assured immediately you join.Just contact the bellow email if you are interested we are here to attend to you anytime you want us. Contact the bellow email for more details. Email:vampirescreed@hotmail.com Sincerely: James Franklyn.

  3. Bravo! Someone else that is willing to speak the truth! Bravo!_____NBCSN is available in almost 2 MILLION more homes than just a few years ago, but Indycar STILL gets less total viewers than it did just a few years ago when NBC took over Versus. Attendance and ratings cratered with the end of season races (just when the title battle got "interesting" HAH!__________And now...new race in Basilia, where Miles celebrated the "rich history" of Indycar racing there. Rich history? What, 7 events in the 100 years of AOW? Yep, some history. Well, at least its an oval. It's not??? Are you kidding me??? Gosh darn road racin furriners.

  4. PURITY RAY LOAN OFFER........ Have you been denied by your banks,or are you in need of of an urgent loan to pay of your bills we are capable of giving loans @ cheaper rate to interested individuals, student, companies and members of the public in need of finance to settle bills, we do offer considerable loans which you can count on. For more information on our various types of loan,then you will have to contact PURITY RAY LOAN FIRM, to help you achieve your desire LOAN APPLICATION FORM TO BE FILLED BORROWERS INFORMATION * Full name:………………………. * SEX * ……………………………. * Country………………………….. * State:……………………………. * Land:…………………………….. * Occupation:…………………….. * phone number:…………………. * Telephone: ………………………….. * Age:………………………………. * Amount needed as loan:……… * Loan Duration:………………….. * Propose of Loan:……………….. * Annual revenue:………………… * Monthly Income:……………….. * Guarantee:………………………. * Payment: monthly or annually Email.....purityrayloanfirm@gmail.com Thank you and God bless Mr Purity Ray PURITY RAY LOAN FIRM we tend to serve you better

  5. Problem: most of the people responding to this article don't know about this service AT ALL! Why? Lack of awareness. This isn't IndyGo. This is CIRTA: might as well be the mattress company because they are asleep at the wheel - something like 3 directors over the last year? Playing with federal grant money is great! This "region" wants commuter rail service, has spent MILLIONS on Transportation studies yet can't even support a commuter bus line? This is largely for suburban riders to get to downtown - not for "service people to work in our hotels and restaurants" ! Get your head out of your backside!! These are professionals, students etc. that don't want to fight traffic, save some money on parking, gas, stress.... if CIRTA would put their federal money into widely promoting the sevive to Greenwood, Fishers & Carmel instead of finding directors and studies - this would be a successful service. Our family uses(d) it daily for the last several years - but the recent uncertainty & now unreliability due to cuts from Carmel has been a problem. Now, costs us an additional $350/month for gas & parking ( $4200/year) plus vehicle wear, service, environmental impact ... YES - this REGION needs this this type of service in order to keep growing and getting the people it needs to fill skilled positions in downtown Indianapolis. Think outside of your own car !!!

ADVERTISEMENT