Baton Rouge pension fund sues directors of mall giant

The Baton Rouge-based Louisiana Municipal Police Retirement System recently filed suit against the board of directors of the nation’s largest shopping mall developer. The retirement fund owns shares of Simon Property Group. The newly commenced business litigation claims that the property group’s board of directors improperly approved an increased compensation package for the company’s CEO without advance shareholder authorization. The lawsuit seeks to have the amount of the increase returned to the company treasury.

According to the pension fund’s lawsuit, the property group’s board of directors ignored a say-on-pay vote in which 73 percent of shares opposed a retention bonus supported by the board. The board pointed to investor returns far higher than S&P averages as justification for the proposed retention bonus. The pension fund asserts that the retention award guarantees huge payments to the CEO simply for staying employed with the company and bears no relation to company performance.

The board’s vote awarded the CEO a $1.25 million annual salary and a retention bonus of double his salary plus $120 million in special stock awards if he stays with the company through 2019. The pension fund claims that the board exceeded its authority by modifying the company’s stock plan without shareholder approval.

The property group’s stock plan generally requires shareholder approval of modifications only when required by law. The pension fund asserts that the law required shareholder approval of the change to the CEO’s compensation package because of its implications on tax law.

Although the pension fund’s business law case will be heard by the chancery court of the state of Delaware, its outcome may affect the retirement futures of thousands of Louisiana residents.

Source: Pensions & Investments, “Simon Property Group directors sued over pay increase for CEO,” Bloomberg, Aug. 9, 2012