A legal fight between a police-pension fund and America’s biggest owner of shopping centers raises an issue of public concern. It is about shareholder rights and CEO pay, and on a deeper level about Wall Street versus Main Street.
The company is Simon Property Group of Indianapolis. Around here it owns Northgate Mall and Tacoma Mall. Simon Property is a classic Wall Street company, a tax-favored real-estate investment trust whose shares are traded publicly on the New York Stock Exchange. Its CEO, David Simon, 50, owns a small minority of the common shares but is the son of one of the two founders and has been CEO since 1995.
In 2011 his board of directors declared him a genius of American real estate and awarded him 1 million shares on top of his generous bonuses and pay. When granted, the stock was valued at $120 million; it is worth closer to $150 million now. For one man this is a stupendous sum, but it might be imaginable, barely, as a reward for outstanding future performance. In Simon’s case, however, the board gave him the shares simply for showing up at work until 2019.
Thanks to the Dodd-Frank Act signed in 2010 by President Obama, public-company shareholders get to vote on actions like this.
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At Simon Property Group most of them are institutional investors who have a distinctly nonpopulist view of CEO pay. They don’t object to big money on moral grounds if a practical argument can be made for it. Last May, they voted 73 percent of the shares against the award to Simon.
Under the law, their vote was advisory only. In any case, the deal was already done.
A shareholder, the Louisiana Municipal Police Employees’ Retirement System, filed a lawsuit. Its argument has to do with the language of the company incentive plan and the rules of the stock exchange, but the broader question is one about ownership and control of public corporations.
Too often in public companies, managers overreach and owners don’t act. But here they did; by corporate standards the vote at Simon Property Group was an owners’ insurrection. And it made no difference.
If this is how public companies choose to behave, they are asking for more rules. One should be to have shareholder votes on executive pay before the money is promised, and not merely be advisory.