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Simon Property Won’t Face Fund’s Executive Pay Lawsuit

Simon Property Group Inc. (SPG), the biggest U.S. shopping-mall owner, won’t have to face a lawsuit claiming it improperly barred investors from voting on an executive-pay plan that yielded a $120 million stock award to Chief Executive Officer David Simon.

Delaware Chancery Court Judge Travis Laster in Wilmington today backed the company’s arguments that a shareholder suit by a Louisiana pension fund should be thrown out because Simon officials agreed to change the compensation plan it targeted.

Simon, based in Indianapolis, faced criticism last year over its CEO’s compensation package. More than 70 percent of the Simon shares voted at the company’s 2012 annual meeting opposed the retention award. To address those complaints, directors changed the pay plan in April to cut the number of shares eligible to vest if Simon, 52, leaves before 2015.

The ruling comes as the U.S. Securities and Exchange Commission continues to weigh a proposal to require corporations to disclose how much more their chief executives earn than rank-and-file employees. The pay-ratio disclosures are mandated by a provision in the U.S. Dodd-Frank Act.

Les Morris, a company spokesman, didn’t immediately return a call for comment on Laster’s ruling today.

Say-on-Pay

Simon investors filed suit in Delaware after the shareholders’ vote on the CEO’s stock grants. In the past, company officials have defended Simon’s compensation by noting total stockholder returns for the past 10 years were 597 percent compared with 58 percent for the S&P 500. Simon was one of the company’s top executives during that period. He has been CEO since 1995 and chairman since 2007.

Simon’s compensation for 2013 was about $16 million, including salary, bonus, and stock awards, according to the company’s proxy filing today.

Simon is the son of Melvin Simon, who formed the company with brothers Herbert and Fred in 1960, the same year it opened its first shopping center in Bloomington, Indiana. The landlord went public in 1993.

The Louisiana Municipal Police Employees Retirement System, a Simon shareholder, and other investors accused directors of exceeding their authority by amending the company’s stock-incentive plan, created in 1998, to allow Simon’s retention grant without shareholders’ approval.

Stuart Grant, a lawyer for the pension fund, didn’t immediately respond to a call seeking comment on the ruling.

Performance Based

The company’s lawyers told Laster last month that the mall owner’s board approved changes to the plan designed to ensure executives got stock awards based solely on their performance and could only receive as much as $600,000 worth of shares in any one grant.

The pension fund argued the original pay plan granted Simon stock awards for simply staying on as the company’s top executive rather than achieving results for shareholders, according to court filings.

Simon officials argued the recent changes to the executive-compensation plan made the Louisiana pension fund’s suit moot.

“We think it’s completely resolved,” Lewis R. Clayton, a lawyer for the directors, told Laster at a March 25 hearing. “The plaintiffs have won.”

Laster allowed David Shepherd, an individual Simon investor, to proceed with his claims the company made misleading disclosures about its changes to the executive-pay plan.

Shepherd contends Simon officials mischaracterized the changes that allowed David Simon to get the disputed stock grants as “non substantive” in proxy materials, according to court filings. The company also claimed the changes limited such grants when they in fact increased the number of shares executives could get in annual awards, Shepherd’s lawyers argued.

The case is Louisiana Municipal Police Employees Retirement System v. Bergstein, CA No. 7764, Delaware Chancery Court (Wilmington).

To contact the reporters on this story: Jef Feeley in Wilmington, Delaware at jfeeley@bloomberg.net; Phil Milford in Wilmington, Delaware at pmilford@bloomberg.net

To contact the editors responsible for this story: Michael Hytha at mhytha@bloomberg.net Fred Strasser, Mary Romano

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