The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
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| David Simon |
The real estate industry somehow just pushed the limits of executive pay. Simon Property Group is giving Chairman and Chief Executive David Simon shares worth $120 million to stick around until 2019. America’s biggest mall owner, co-founded by Simon’s father and uncle, has rebounded well from the recession. But Simon already has a fat compensation deal. Top brass don’t deserve extra bonuses just for showing up.
Keeping good managers around is a good idea. Simon is one such CEO — and, at 49, a comparatively young one at that. Shareholders of the Indianapolis-based company have seen their investment grow nearly nine-fold since he took the top job in 1995, weathering two tough recessions. But Simon is already handsomely rewarded for this performance.
Last year, he was paid $7.1 million in salary, bonus and long-term incentives. There was also an additional $17 million in equity awarded, subject to the company’s performance. This should be enough to keep Simon cheerfully coming to the office to honor the legacy of what his relatives built and also to keep doing his best on behalf of shareholders.
Certainly the board could have found a cheaper way to keep him. His surname is emblazoned on the company headquarters. And Simon’s family controls more than 11 percent of the equity. That makes the prospect of his leaving Simon Property a conceivable, but not compelling, possibility.
Worse, the company was lax with the details of Simon’s package. If he is terminated without cause or even if he resigns with “good reason” inside of two years, half the retention bonus shares vest immediately. In such an event after July 2013, they all vest. Simon Property’s relocating the company offices by more than 35 miles is among the hardships that would constitute a good enough reason for Simon to pack up and collect his “retention” bonus.
Viacom handed CEO Philippe Dauman almost $85 million last year, including some one-time stock awards, making him the country’s highest-paid CEO. And Citigroup gifted boss Vikram Pandit a lavish retention bonus of at least $16.7 million over four years on top of his standard pay package. Simon Property nevertheless managed to hit a brazen new high — and low.
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