Annual Meeting: May 4

Simon Properties’ Chair and CEO, David Simon, received total compensation for 2022 of $35,667,783, more than three times what he had been paid the prior year. This includes a bonus of $28 million dollars. The company gave mammoth cash awards, called OPI Incentive awards, to 23 executives on February 10, 2022. 

The company filed an open letter to shareholders with the SEC after both ISS and Glass Lewis recommended voting against the advisory vote on pay and other items. Some of the things they said in defense of the award struck me as an indictment of it. For example, David Simon’s OPI Incentive award was $24.25 million, which is “approximately 37% of the total pool of OPI Incentives awarded.” Shareholders are more tolerant, and rightly so, of awards given to executives other than the CEO that may leave for more lucrative jobs elsewhere. The risk here seems minimal for most employees since the industry of commercial real estate is struggling across the board. 

The company has already gained notoriety as one of this season’s examples of excess. The Financial Times commissioned ISS Corporate Solutions to do an analysis of S&P 500 companies. Journalist Patrick Temple-West highlighted Simon Properties in his article US executive pay bucked falling stock market in 2022 noting that shareholder returns dropped 22 percent in 2022.

Writing in The New Republic, in an article entitled The Stock Market’s Down—but Guess Which Direction CEO Pay Is Going Timothy Noah added some additional data: “According to The Motley Fool, over the past year, its returns fell 15.89 percent while the S&P 500 fell 5.80 percent. Over the past five years, Simon Properties’ returns fell 29.11 percent while the S&P rose 55.77 percent.’

The tone of these stories is along the lines of “How could the Board award such excessive cash when the equity is performing so poorly?” I expect on a fundamental level the poor performance of the equity is  exactly why the cash award was made. As equity becomes less valuable expect more clamor for cash. There is too much sense of entitlement among some executives, particularly in this case where the CEO is son of one of the co-founders of the company and nephew of the other.