Louisiana Municipal Police Employees Retirement System, Baton Rouge, sued Simon Property Group directors, accusing them of improperly increasing CEO David Simon's compensation last year without seeking shareholder approval.
The board of the largest U.S. shopping mall owner wrongfully authorized a compensation package for Mr. Simon that provided $1.25 million in annual salary, a cash bonus of double his salary and $120 million in special stock awards as an incentive to stay with the company through 2019, the $1.4 billion retirement system claimed in the suit, filed Wednesday in Delaware Chancery Court in Wilmington.
The $120 million retention award “is not tied to the company's performance and instead guarantees enormous payments to Simon simply if he stays employed by the company” for seven more years, the pension fund alleged.
Les Morris, a spokesman for Simon Property Group, said by e-mail that the lawsuit is “meritless” and the company will defend itself against the claims.
The suit comes more than two months after Simon Property officials disclosed that 73% of the Simon Property shares voted at the company's annual meeting opposed the granting of the retention award to the company's CEO.
Simon Property officials sought to defend the CEO's compensation plan prior to the say-on-pay vote, noting total stockholder returns for the past 10 years were 597% compared with 58% for the S&P 500.
Mr. Simon had been one of the company's top executives during that period. Mr. Simon, son of the company's co-founder, has been CEO since 1995 and chairman since 2007.
The Louisiana pension fund, a Simon Property shareholder, accused the company's directors of exceeding their authority by amending the company's stock-incentive plan, created in 1998, without seeking shareholders' approval.
The stock-incentive plan allowed the board to change its terms unilaterally unless shareholder approval was “required by law, regulation of listing requirement,” the pension fund said.
Since changes to executives' performance goals under the plan implicate tax laws, the board was required to have investors vote on them, the pension fund said.
The investors filed a so-called derivative suit against Simon Property's board, which would return any recovery from insurance covering the company's officers and directors to the company's coffers.
