DEFA14A: Simon Property Group Defends Executive Pay and Redomestication Plans Ahead of 2025 Annual Meeting

Simon Property Group addresses concerns regarding executive compensation and a proposed redomestication from Delaware in a supplement to its definitive proxy statement.

Summary

• Simon Property Group has issued a supplement to its definitive proxy statement addressing concerns related to executive compensation ('Say on Pay') and a proposed redomestication from Delaware to Indiana.
• The company defends its executive compensation program, particularly the 2024 OPI awards granted in connection with the successful monetization of its investment in ABG, which resulted in $1.5 billion in cash proceeds.
• Simon Property Group highlights that ISS (Institutional Shareholder Services) is recommending against the 'Say on Pay' proposal due to the size of the CEO's 2024 OPI award, despite the award's five-year vesting period and the company's exercise of conservative discretion.
• The company argues that the CEO's aggregate compensation, including vesting, is less than 1.7x of the ISS peer CEO median.
• Glass Lewis has recommended FOR the 'Say on Pay' proposal.
• Regarding the Class B structure, Simon Property Group states that it has been in place since the IPO in 1993 and has not been an issue for shareholders until recently.
• The company emphasizes that the Class B structure is not a typical dual-class structure and that ISS inaccurately characterizes the Class B voting rights.
• The Class B structure has historically facilitated successful acquisitions, resulting in approximately $8.5 billion of value in the Operating Partnership.
• The company is considering redomestication from Delaware to Indiana, noting that over 70% of publicly traded REITs are not incorporated in Delaware.
• Simon Property Group highlights the benefits of Indiana statutory law, the avoidance of Delaware's $250,000 annual franchise tax, and the company's long history and close ties with the State of Indiana.

Sentiment

Score: 6

Explanation: The document presents a mixed sentiment. While it defends the company's actions and highlights positive outcomes, it also acknowledges challenges and criticisms from ISS.

Positives

• The company received 94.3% support for its 2024 'Say on Pay' proposal.
• The 2024 OPI Awards were granted in connection with the successful monetization of the company's investment in ABG, resulting in $1.5 billion in cash proceeds.
• The Class B structure has historically facilitated successful acquisitions, resulting in approximately $8.5 billion of value in the Operating Partnership.
• Redomestication to Indiana could save the company $250,000 annually in franchise taxes.

Negatives

• ISS is recommending against the 'Say on Pay' proposal due to the size of the CEO's 2024 OPI award.
• ISS inaccurately characterizes the Class B voting rights.
• Delaware incorporation imposes substantial costs on companies, including annual franchise tax and litigation costs.

Risks

• Negative recommendation from ISS on the 'Say on Pay' proposal could lead to shareholder dissent.
• Potential challenges in obtaining shareholder approval for the redomestication from Delaware to Indiana.
• Litigation costs associated with being incorporated in Delaware.

Future Outlook

The document outlines the company's defense of its executive compensation and redomestication plans, indicating a focus on shareholder engagement and cost reduction.

Management Comments

• The Compensation Committee worked extensively with outside counsel, consultants and other outside advisors in formulating a program responsive to feedback.
• We have repeatedly requested that ISS corrects this mischaracterization with no success.
• The Board and Management have discussed redomestication from Delaware for a long time.

Industry Context

The discussion of redomestication reflects a broader trend among companies to evaluate their state of incorporation based on legal, tax, and cost considerations. The company notes that over 70% of publicly traded REITs are not incorporated in Delaware.

Comparison to Industry Standards

• The document compares Simon Property Group's CEO compensation to the median of an ISS peer group.
• The company highlights that over 70% of publicly traded REITs are not incorporated in Delaware, suggesting that redomestication to Indiana would align it with a majority of its peers.
• The document mentions Eli Lilly, Elevance, and Cummins as other well-respected companies incorporated in Indiana.

Stakeholder Impact

• Shareholders: Impacted by executive compensation decisions and potential redomestication.
• Employees: Potentially impacted by the company's financial performance and strategic decisions.
• Customers: Indirectly impacted by the company's overall strategy and financial health.

Next Steps

• Shareholder vote on the 'Say on Pay' proposal at the annual meeting.
• Potential shareholder vote on the redomestication proposal.
• Continued engagement with ISS and other stakeholders to address concerns.

Key Dates

Keywords

Simon Property Group, Say on Pay, Executive Compensation, Redomestication, Delaware, Indiana, Class B Structure, Proxy Statement, ISS, Glass Lewis, OPI Awards, ABG