IBJNews

Simon amends plan for CEO's controversial $154M bonus

Back to TopCommentsE-mailPrintBookmark and Share

Simon Property Group Inc. has amended its agreement with CEO David Simon for a hotly debated $154 million retention bonus, adding criteria to partially base the award on the financial performance of the company.

In 2011, the board of the Indianapolis-based retail real estate giant awarded Simon the bonus of 1 million shares—valued at that time at $120 million—contingent on him staying with the company through July 2019.

The changes to the agreement outlined in a Jan. 2 filing with the U.S. Securities and Exchange Commission tie the CEO’s bonus to a pay-for-performance plan, as well as length of tenure. Under the amendments, the firm must meet goals related to improved funds from operation, a key measure of financial performance for real estate investment trusts.

“The performance criteria in the modified award are designed to incentivize Mr. Simon to continue and improve upon the company’s outstanding performance achieved under his leadership,” according to the filing.

The firm also believes that the changes will head off legal action against the company based on the controversial retention bonus. “The company has made a motion to dismiss the claims as moot,” according to the filing.

The bonus currently is worth about $154 million, based on the firm’s share price.

Some stockholders were incensed by the original plan for the retention bonus, believing that it lacked incentives for David Simon to continue performing at a high level. In May 2012, shareholders representing 73 percent of Simon shares voted at the firm’s annual meeting to oppose the award.

The vote was non-binding, but it sent a message to company officials that shareholders were not pleased with the move. Earlier this year, the board proposed a modified compensation package that left in place the stock retention bonus but tinkered with unrelated performance-based rewards.

Shareholders voted in favor of the package at this year’s annual meeting.

However, legal action against the firm has continued. In May, a judge ruled that investors could proceed with a lawsuit accusing company directors of improperly raising the CEO’s pay without shareholder approval.

Plantiffs included the Louisiana Municipal Police Employees Retirement System and the Delaware County Employees’ Retirement Fund. In court filings, they called Simon’s new compensation package “outlandish on its face” because it didn’t stipulate that the company achieve any performance benchmarks for Simon to get the $120 million.

“The only requirement for this enormous grant was for Simon to continue to show up for eight more years,” court papers said.

The plaintiffs also alleged board members breached their fiduciary duty to shareholders and violated the law by amending the company’s 1998 incentive-compensation plan without putting it to a shareholder vote.

The plan had to be changed, the plaintiffs argued, because it tied pay to performance goals and clearly barred “a retention award payable to an employee simply for sitting at his or her desk for a designated period.”

The new changes to the terms of David Simon’s retention bonus are not significant enough to sway the plaintiffs in the case, said Stuart Grant, lead attorney in the consolidated action.

“They put lipstick on a pig,” Grant told IBJ Friday morning.

Grant noted that the amended plan does not address the issue of whether the board violated its incentive-compensation plan.

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. The $104K to CRC would go toward debts service on $486M of existing debt they already have from other things outside this project. Keystone buys the bonds for 3.8M from CRC, and CRC in turn pays for the parking and site work, and some time later CRC buys them back (with interest) from the projected annual property tax revenue from the entire TIF district (est. $415K / yr. from just this property, plus more from all the other property in the TIF district), which in theory would be about a 10-year term, give-or-take. CRC is basically betting on the future, that property values will increase, driving up the tax revenue to the limit of the annual increase cap on commercial property (I think that's 3%). It should be noted that Keystone can't print money (unlike the Federal Treasury) so commercial property tax can only come from consumers, in this case the apartment renters and consumers of the goods and services offered by the ground floor retailers, and employees in the form of lower non-mandatory compensation items, such as bonuses, benefits, 401K match, etc.

  2. $3B would hurt Lilly's bottom line if there were no insurance or Indemnity Agreement, but there is no way that large an award will be upheld on appeal. What's surprising is that the trial judge refused to reduce it. She must have thought there was evidence of a flagrant, unconscionable coverup and wanted to send a message.

  3. As a self-employed individual, I always saw outrageous price increases every year in a health insurance plan with preexisting condition costs -- something most employed groups never had to worry about. With spouse, I saw ALL Indiana "free market answer" plans' premiums raise 25%-45% each year.

  4. It's not who you chose to build it's how they build it. Architects and engineers decide how and what to use to build. builders just do the work. Architects & engineers still think the tarp over the escalators out at airport will hold for third time when it snows, ice storms.

  5. http://www.abcactionnews.com/news/duke-energy-customers-angry-about-money-for-nothing

ADVERTISEMENT