Simon Property Group, Inc. (SPG)

FORM DEF 14A | Proxy Statement (definitive)
Mar. 27, 2019 4:21 PM
|
About: Simon Property Group, Inc. (SPG)View as PDF
SIMON PROPERTY GROUP INC /DE/ (Form: DEF 14A, Received: 03/27/2019 16:22:58)

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SIMON PROPERTY GROUP, L.P. 2019 STOCK INCENTIVE PLAN TABLE OF CONTENTS

Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No.             )

Filed by the Registrant ý

Filed by a Party other than the Registrant o

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Preliminary Proxy Statement

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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

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Definitive Proxy Statement

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Definitive Additional Materials

o

 

Soliciting Material under §240.14a-12

 

Simon Property Group, Inc.

(Name of Registrant as Specified In Its Charter)

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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Fee paid previously with preliminary materials.

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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

 

 

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March 27, 2019

Dear Fellow Shareholders,

Please join me and the Board of Directors at our 2019 Annual Meeting of Shareholders on May 8, 2019, at our headquarters in Indianapolis, Indiana. The business to be conducted at the meeting is explained in the attached Notice of Annual Meeting and Proxy Statement.

Simon Property Group continued its track record of posting the strongest financial results in our industry. I would like to thank our employees for their hard work and dedication and our shareholders for their continued interest and support of our Company.

We are pleased to furnish proxy materials to our shareholders over the Internet. We believe that this e-proxy process expedites shareholders' receipt of proxy materials, while also lowering the costs and reducing the environmental impact of our 2019 Annual Meeting.

Whether or not you plan to attend the meeting in person, please read the Proxy Statement and vote your shares. Instructions for voting by mail, Internet and telephone are included in your Notice of Internet Availability of Proxy Materials or proxy card (if you receive your materials by mail). We hope that after you have reviewed the Proxy Statement you will vote in accordance with the Board's recommendations. Your vote is important to us and our business.

Sincerely,

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David Simon
Chairman of the Board, Chief Executive Officer and President

   




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  NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

 
   
   
   
   
   
   
   

 

 

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MAY 8, 2019

 

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8:30 A.M.
(EDT)

 

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Simon Property Group Headquarters
225 West Washington Street,
Indianapolis, Indiana 46204

 

 

 

ITEMS OF BUSINESS

1.
Elect the thirteen director nominees named in this Proxy Statement, including three directors to be elected by the voting trustees who vote the Class B common stock;

2.
Advisory vote to approve the compensation of our Named Executive Officers;

3.
Ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for 2019;

4.
Vote to approve the 2019 Stock Incentive Plan;

5.
Shareholder Proposal, if properly presented; and

6.
Other business as may properly come before the meeting or any adjournments or postponements of the meeting.

RECORD DATE

You can vote if you were a shareholder of record on March 15, 2019 (the "Record Date").

ANNUAL REPORT

Our 2018 Annual Report to Shareholders accompanies, but is not part of, or incorporated into, this Proxy Statement.

PROXY VOTING

On or about March 27, 2019, a Notice of Internet Availability of Proxy Materials and Notice of Annual Meeting of Shareholders (the "Notice") is first being mailed to our shareholders of record as of the Record Date and our proxy materials are first being posted on the website referenced in the Notice ( www.proxyvote.com ). As more fully described in the Notice, all shareholders may choose to access our proxy materials on the website referred to in the Notice or may request a printed set of our proxy materials. In addition, the Notice and website provide information regarding how you may request to receive proxy materials in printed form by mail or electronically by email on an ongoing basis. The Company will make a $1.00 charitable contribution to the Simon Youth Foundation ( www.syf.org ) on behalf of each shareholder who signs up for electronic delivery. For those shareholders who previously requested to receive proxy materials in printed form by mail or electronically by email on an ongoing basis, you will receive those materials as you requested.

Shareholders as of the Record Date are invited to attend the 2019 Annual Meeting, but if you cannot attend in person, please vote in advance of the meeting by using one of the methods described in the Proxy Statement. Shareholders may vote their shares (1) in person at the 2019 Annual Meeting, (2) by telephone, (3) through the Internet or (4) by completing and mailing a proxy card if you receive your proxy materials by mail. Specific instructions for voting by telephone or through the Internet are included in the Notice. If you attend and vote at the meeting, your vote at the meeting will replace any earlier vote you cast.

By order of the Board of Directors,

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Steven E. Fivel
General Counsel and Secretary

March 27, 2019

   




Table of Contents


TABLE OF CONTENTS

PLEASE VOTE  

  2

PROXY SUMMARY  

 
3

SUMMARY OF 2018 FINANCIAL PERFORMANCE  

 
5

CORPORATE GOVERNANCE OF THE COMPANY  

 
7

Board Leadership Structure 

  7

Summary of Board Experience 

  7

The Board Believes that its Members Should 

  8

The Board's Role in Oversight of Risk Management 

  8

Director Independence 

  8

Policies on Corporate Governance 

  8

Proxy Access 

  9

Majority Vote Standard for Election of Directors 

  9

Nominations for Directors 

  9

Communications with the Board 

  9

Shareholder Engagement and Outreach 

  10

Section 16(a) Beneficial Ownership Reporting Compliance 

  10

Transactions With Related Persons 

  10

Transactions With the Simons 

  10

PROPOSAL 1: Election of Directors  

 
11

Nominees for Director to Be Elected by Holders of Voting Shares 

  11

Nominees for Director to Be Elected by the Voting Trustees Who Vote the Class B Common Stock 

  14

Meetings and Committees of the Board 

  15

Committee Function and Membership 

  16

Director Compensation 

  17

Ownership of Equity Securities of the Company 

  19

PROPOSAL 2: Advisory Vote to Approve the Compensation of our Named Executive Officers  

 
21

COMPENSATION COMMITTEE REPORT  

 
21

COMPENSATION DISCUSSION AND ANALYSIS  

 
22

Executive Summary 

  22

Objectives of Our Executive Compensation Program 

  23

Shareholder/Governance Friendly Aspects of Our Current Executive Compensation Program 

  24

2018 Say-on-Pay Vote 

  24

Executive Compensation Approach and Process 

  25

Company Peer Group and Compensation Assessment 

  27

Compensation in 2018 

  28

Other Elements of Compensation 

  30

Other Policies 

  31

Compensation Decisions for 2019 

  31

EXECUTIVE COMPENSATION TABLES  

 
32

Summary Compensation Table 

  32

Grants of Plan-Based Awards in 2018 

  33

Outstanding Equity Awards At 2018 Fiscal Year-End 

  34

Option Exercises and Stock Vested in 2018 

  35

Nonqualified Deferred Compensation in 2018 

  35

Estimated Post-Employment Payments Under Alternative Termination Scenarios 

  36

Employment Agreement with David Simon 

  37

ASSESSMENT OF COMPENSATION-RELATED RISKS  

 
40

2018 PAY RATIO DISCLOSURE  

 
41

PROPOSAL 3: Ratification of Independent Registered Public Accounting Firm  

 
42

REPORT OF THE AUDIT COMMITTEE  

 
42

PROPOSAL 4: Vote to Approve the 2019 Stock Incentive Plan  

 
44

PROPOSAL 5: Shareholder Proposal  

 
51

SUSTAINABILITY  

 
53

ADDITIONAL INFORMATION  

 
54

Annual Report 

  54

Shareholder Proposals at Our 2020 Annual Meeting 

  54

Proxy Access Nominations 

  54

Where You Can Find More Information 

  54

Incorporation by Reference 

  54

FREQUENTLY ASKED QUESTIONS AND ANSWERS  

 
55

2019 STOCK INCENTIVE PLAN  

 
A-1


SIMON PROPERTY GROUP    2019 PROXY STATEMENT     1


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PLEASE VOTE

It is very important that you vote to play a part in the future of the Company. New York Stock Exchange ("NYSE") rules provide that if your shares are held through a broker, bank, or other nominee, they cannot vote on your behalf on non-discretionary matters without your instruction.

PROPOSALS WHICH REQUIRE YOUR VOTE

 
    PROPOSAL       MORE
INFORMATION
  BOARD
RECOMMENDATION
  BROKER
NON-VOTES
  ABSTENTIONS   VOTES REQUIRED
FOR APPROVAL
   
 

 

 

1

 

Elect the ten (10) independent director nominees named in this Proxy Statement

 

Page 11

 

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FOR
ALL NOMINEES


 

Do not impact outcome.

 

Do not impact outcome.

 

More votes FOR than AGAINST. Under our By-Laws, a nominee who receives more AGAINST votes than FOR votes will be required to tender his or her resignation.

 

 

 

 

2

 

Advisory vote to approve the compensation of our Named Executive Officers

 

Page 21

 

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FOR

 

Do not impact outcome.

 

Do not impact outcome.

 

Majority of votes cast.

 

 
 

 

 

3

 

Ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for 2019

 

Page 42

 

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FOR

 

N/A

 

Do not impact outcome.

 

Majority of votes cast.

 

 

 

 

4

 

Vote to approve the 2019 Stock Incentive Plan

 

Page 44

 

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FOR

 

Do not impact outcome.

 

Count as a vote against.

 

Majority of votes cast.

 

 
 

 

 

5

 

Shareholder Proposal requesting disclosure of political contributions

 

Page 51

 

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AGAINST

 

Do not impact outcome.

 

Do not impact outcome.

 

Majority of votes cast.

 

 



 

 

BY INTERNET USING A COMPUTER




 

BY TELEPHONE




 

BY MAIL




      

 

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Vote 24/7
www.proxyvote.com





 

Dial toll-free 24/7
1-800-690-6903





 

Cast your ballot, sign your proxy card
and send by pre-paid mail




                      

 

PLEASE VISIT    annualmeeting.simon.com

Review and download easy to read versions of our Proxy Statement and Annual Report on Form 10-K for the fiscal year ended December 31, 2018 (the "Annual Report").

SIGN UP FOR FUTURE ELECTRONIC DELIVERY TO REDUCE THE IMPACT ON THE ENVIRONMENT.

The Company will make a $1.00 charitable contribution to the Simon Youth Foundation ( www.syf.org ) on behalf of each shareholder who signs up for electronic delivery. To sign up for electronic delivery, please follow the instructions above to vote "BY INTERNET USING A COMPUTER", and when prompted, indicate that you agree to receive or access proxy materials electronically in future years.


2     SIMON PROPERTY GROUP    2019 PROXY STATEMENT


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PROXY SUMMARY

This proxy summary highlights information which may be contained elsewhere in this Proxy Statement. This summary does not contain all of the information that you should consider, and you should read the entire Proxy Statement carefully before voting. Page references are supplied to help you find further information in this Proxy Statement.

ELIGIBILITY TO VOTE (Page 55)

You can vote if you were a shareholder of record at the close of business on the Record Date (March 15, 2019).

HOW TO CAST YOUR VOTE (Page 55)

You can vote by any of the following methods: (i) Internet:   Go to www.proxyvote.com until 11:59 P.M. EDT on May 7, 2019; (ii) Telephone:   Call 1-800-690-6903 until 11:59 P.M. EDT on May 7, 2019; (iii) Mail:   Complete, sign and return your proxy or voting instruction card; or (iv) In Person:   Vote in person by ballot at the 2019 Annual Meeting.

GOVERNANCE OF THE COMPANY (Page 7)

We pride ourselves on continuing to observe and implement best practices in our corporate governance.

VOTING
PROPOSALS

  BOARD'S
RECOMMENDATIONS

Proposal 1   Elect the ten (10) independent director nominees named in this Proxy Statement   FOR
ALL NOMINEES
(Page 11)
Proposal 2   Advisory vote to approve the compensation of our Named Executive Officers   FOR
(Page 21)
Proposal 3   Ratify the appointment of Ernst & Young LLP as our independent registered public accounting firm for 2019   FOR
(Page 42)
Proposal 4   Vote to approve the 2019 Stock Incentive Plan   FOR
(Page 44)
Proposal 5   Shareholder Proposal requesting disclosure of political contributions   AGAINST
(Page 51)

1.    ELECTION OF DIRECTORS (Page 11)

NAME OF
INDEPENDENT DIRECTOR

  AGE
  OCCUPATION
  COMMITTEE MEMBERSHIPS

Glyn F. Aeppel

  60   President and CEO of Glencove Capital   Governance and Nominating

Larry C. Glasscock

    70   Former Chairman and CEO of Anthem, Inc.   Lead Independent Director, Audit, Governance and Nominating

Karen N. Horn, Ph.D.

  75   Senior Managing Director of Brock Capital Group   Governance and Nominating (Chair)

Allan Hubbard

    71   Co-Founder, Chairman and Partner of E&A Companies   Compensation, Governance and Nominating

Reuben S. Leibowitz

  71   Managing Member of JEN Partners   Compensation (Chair), Audit

Gary M. Rodkin

    66   Retired Chief Executive Officer and Director of ConAgra Foods, Inc.   Governance and Nominating

Stefan M. Selig

  56   Founder of BridgePark Advisors LLC   Audit, Compensation

Daniel C. Smith, Ph.D.

    61   President and CEO of the Indiana University Foundation and Clare W. Barker Professor of Marketing, Indiana University, Kelley School of Business   Compensation

J. Albert Smith, Jr.

  78   Chairman, Chase Bank in Central Indiana and Managing Director of J.P. Morgan Private Bank   Audit (Chair), Compensation

Marta R. Stewart

    61   Retired Executive Vice President and Chief Financial Officer of Norfolk Southern Corporation   Audit

 

NAME OF CLASS B DIRECTOR
  AGE
  OCCUPATION
  COMMITTEE MEMBERSHIPS

David Simon

  57   Chairman of the Board, Chief Executive Officer and President of the Company   None

Richard S. Sokolov

    69   Vice Chairman of the Company   None

Herbert Simon

  84   Chairman Emeritus of the Board of the Company   None


SIMON PROPERTY GROUP    2019 PROXY STATEMENT     3


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PROXY SUMMARY

2.    ADVISORY VOTE TO APPROVE THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS (Page 21)

3.    COMPENSATION DISCUSSION AND ANALYSIS (Page 22)

The Compensation Committee of the Board believes that the Company's rigorous performance-based compensation programs operated to align shareholders' interests with the compensation of our Named Executive Officers ("NEOs") in 2018. The Compensation Committee is confident that our executive compensation program is appropriately designed to incent strong performance over the longer term.

4.    RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (Page 42)

5.    VOTE TO APPROVE THE 2019 STOCK INCENTIVE PLAN (Page 44)

6.    SHAREHOLDER PROPOSAL (Page 51)


4     SIMON PROPERTY GROUP    2019 PROXY STATEMENT


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This Proxy Statement and accompanying proxy card are being made available to shareholders on or about March 27, 2019, in connection with the solicitation by the Board of Directors (the "Board") of Simon Property Group, Inc. ("Simon", "SPG", "we", "us", "our" or the "Company") of proxies to be voted at the 2019 Annual Meeting of Shareholders (the "2019 Annual Meeting") to be held at the corporate headquarters of the Company located at 225 West Washington Street, Indianapolis, Indiana 46204, on May 8, 2019, at 8:30 a.m. (EDT). As required by rules adopted by the U.S. Securities and Exchange Commission (the "SEC"), the Company is making this Proxy Statement and its Annual Report available to shareholders electronically via the Internet. In addition, SPG is using the SEC's "Notice and Access" rules to provide shareholders with more options for receipt of these materials. Accordingly, on March 27, 2019, the Company will begin mailing the Notice of Internet Availability of Proxy Materials (the "Notice") to shareholders containing instructions on how to access this Proxy Statement and the Company's Annual Report via the Internet, how to vote online or by telephone, and how to receive paper copies of the documents and a proxy card.


SUMMARY OF 2018 FINANCIAL PERFORMANCE

This summary provides highlights of certain information in this Proxy Statement. This summary does not contain all of the information that you should consider, and therefore you should read the entire Proxy Statement before voting. For more complete information regarding the Company's 2018 performance you should review the Company's Form 10-K for

the year ended December 31, 2018 and Form 8-K furnished to the SEC on February 1, 2019.

In 2018, the Company continued to deliver consistent strong growth across our key financial metrics.

In 2018, we generated funds from operations ("FFO") of $12.13 per share, the highest we have ever reported. See "Where do I find reconciliation of Non-GAAP terms to GAAP terms?" in the section of this Proxy Statement titled "Frequently Asked Questions and Answers" on page 57. Our FFO compound annual growth rate ("CAGR") for the period from 2010 through 2018 was 11.7%.

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SIMON PROPERTY GROUP    2019 PROXY STATEMENT     5


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SUMMARY OF 2018 FINANCIAL PERFORMANCE

In 2018, we paid dividends per share of $7.90, the highest ever paid by the Company. The CAGR for our annual dividend payments for the period from 2010 through 2018 was 14.9%. The Company has a track record of returning funds to shareholders not only in the form of dividends, but over the last four years through a share repurchase program as well. In 2018, aggregating the Company's dividend payments and share repurchase program, the Company returned approximately $3.2 billion to its shareholders. Over the last nine years we have returned more than $18.8 billion to our shareholders.

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Our Return on Equity increased from 13.4% in 2010 to 74.3% in 2018.

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6     SIMON PROPERTY GROUP    2019 PROXY STATEMENT


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CORPORATE GOVERNANCE OF THE COMPANY

BOARD LEADERSHIP STRUCTURE

In March of 2014, Larry C. Glasscock was appointed by our independent directors to serve as our Lead Independent Director. The Lead Independent Director performs the duties specified in the Governance Principles described below and such other duties as are assigned from time to time by the independent directors of the Board. We believe that our Lead Independent Director is performing his duties in an effective manner. Under our Governance Principles, the Lead Independent Director is empowered to:

preside at all meetings of the Board at which the Chairman of the Board ("Chairman") is not present, including executive sessions of the independent directors;
serve as a liaison between the Chairman and the independent directors, including by facilitating communication and sharing of views between the independent directors and the Chairman;
approve materials sent to the Board and advise on such information;
approve meeting agendas for the Board and coordinate with the Chairman with respect to developing such agendas;
approve meeting schedules for the Board to assure there is sufficient time for discussion of all agenda items and coordinate with the Chairman with respect to developing such schedules;
call meetings of the independent directors;
if requested by major shareholders, ensure that he or she is available for consultation and direct communication; and
retain outside advisors and consultants to report directly to the Board on Board-wide matters.

Mr. David Simon has served since 2007 as the Chairman and Chief Executive Officer ("CEO") and since February 15, 2019, also as our President. The Board believes that having Mr. David Simon fill these leadership roles is an appropriate and efficient leadership structure. Together, our Lead Independent Director and the CEO deliver clear leadership, responsibility and accountability, effective decision-making and a cohesive corporate strategy.

Ten of our director nominees are independent under the requirements set forth in the NYSE Listed Company Manual. All of the members of the Audit Committee, Governance and Nominating Committee, and Compensation Committee are independent directors under the listing requirements and rules of the NYSE and other applicable laws, rules, and regulations.

We recognize the importance of refreshing our Board. Consistent with this belief, in the last five years we have appointed four new directors, including two new directors in the last two years.

Today 40% of our independent directors have been on the Board for fewer than five years compared to 12.5% in 2015.

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SUMMARY OF BOARD EXPERIENCE

 
   
   
   
   
   
   
   
   
   
   
   
   
   
   
   
        G.
AEPPEL
  L.
GLASSCOCK
  K.
HORN
  A.
HUBBARD
  R.
LEIBOWITZ
  G.
RODKIN
  S.
SELIG
  A.
SMITH
  D.
SMITH
  M.
STEWART
  D.
SIMON
  R.
SOKOLOV
  H.
SIMON
   
    High level of financial literacy and capital markets experience                         X   X   X     X   X   X   X     X   X      
    Relevant Chief Executive Officer/President experience                         X   X   X   X   X   X       X   X       X   X        
    Retail real estate or commercial real estate experience                         X   X       X       X       X   X   X  
    Broad international exposure                         X       X           X   X       X       X       X    
    Marketing/marketing-related technology experience                               X     X       X          
    Governmental or geopolitical expertise                                 X   X           X                   X        
    Risk oversight/management expertise                         X   X   X   X   X   X     X   X   X   X   X   X  


SIMON PROPERTY GROUP    2019 PROXY STATEMENT     7


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CORPORATE GOVERNANCE OF THE COMPANY

THE BOARD BELIEVES THAT ITS MEMBERS SHOULD:

exhibit high standards of independent judgment and integrity;
have a strong record of achievements;
have an understanding of our business and the competitive environment in which we operate;
have diverse experiences and backgrounds, including racial and gender diversity; and
be committed to enhancing shareholder value on a long-term basis and have sufficient time to carry out their duties.

In addition, the Board has determined that the Board, as a whole, should strive to have the right mix of characteristics and skills necessary to effectively perform its oversight responsibilities. The Board believes that directors with one or more of the following professional skills or experiences can assist in meeting this goal:

leadership of large and complex organizations;
accounting and finance;
e-commerce related Internet-based businesses;
capital markets;
retail marketing;
strategic planning;
real estate acquisitions, development, and operations;
banking, legal, and corporate governance;
government and governmental relationships;
international business; and
human capital management

THE BOARD'S ROLE IN OVERSIGHT OF RISK MANAGEMENT

While risk management is primarily the responsibility of our management, the Board provides overall risk oversight focusing on the most significant risks we face. We have implemented a Company-wide enterprise risk management process to identify and assess the major risks we face and to develop strategies for controlling, mitigating, and monitoring risk. As part of this process, we gather information throughout our Company on an annual basis to identify and prioritize management of these major risks. The identified risks and risk mitigation strategies are validated with management and discussed with the Audit Committee on an ongoing basis.

The Audit Committee reviews our risk management programs and reports on these items to the full Board. Our Vice President of Audit Services is responsible for supervising the enterprise risk management process and in that role reports directly to the Audit Committee. Other members of senior management who have responsibility for designing and implementing various aspects of our risk management process also regularly meet with the Audit Committee. The Audit Committee discusses our identified financial and operational risks with our CEO and Chief

Financial Officer and receives reports from other members of senior management with regard to our identified risks.

The Compensation Committee is responsible for overseeing risks relating to our compensation policies and practices. Specifically, the Compensation Committee oversees the design of incentive compensation arrangements for our executive officers to implement our pay-for-performance philosophy without encouraging or rewarding excessive risk-taking by our executive officers.

Our management regularly conducts additional reviews of risks, as needed, or as requested by the Board or Audit Committee.

DIRECTOR INDEPENDENCE

The Board has adopted standards to assist it in making determinations of director independence. These standards incorporate, and are consistent with, the definition of "independent" contained in the NYSE Listed Company Manual and other applicable laws, rules and regulations in effect from time to time regarding director independence. These standards are included in our Governance Principles, which are available at governanceprinciples.simon.com . In March 2014, the Board amended and restated the Governance Principles to strengthen the role of the Lead Independent Director. The Board has affirmatively determined that each person nominated by the Board for election as a director by the holders of voting shares of common stock and listed in this Proxy Statement meets these standards and is independent.

Mr. David Simon, Mr. Richard S. Sokolov and Mr. Herbert Simon are our employees and are not independent directors.

POLICIES ON CORPORATE GOVERNANCE

Good corporate governance is important to ensure that the Company is managed for the long-term benefit of its shareholders and to enhance the creation of long-term shareholder value. Each year, the Governance and Nominating Committee reviews our Governance Principles and recommends to the Board any suggested modifications. Also, the Audit Committee obtains reports from management and the Company's senior internal auditing executive that the Company and its subsidiaries are operating in conformity with the Company's Code of Business Conduct and Ethics, which can be found at codeofconduct.simon.com , and advises the Board with respect to the Company's policies and procedures regarding compliance with the Company's Code of Business Conduct and Ethics. In addition, each of the Board's standing committees reviews its written charter on an annual basis to consider whether any changes are required. These charters are located on our website at committeecomposition.simon.com . In addition to clicking on the preceding links, the current version of each of these documents is available by visiting www.simon.com and navigating to "Governance" by clicking on "Investors", or by requesting a printed copy without charge upon written request to our Secretary at 225 West Washington Street, Indianapolis, Indiana 46204.


8     SIMON PROPERTY GROUP    2019 PROXY STATEMENT


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CORPORATE GOVERNANCE OF THE COMPANY

We will also either disclose on Form 8-K and/or post on our Internet website any substantive amendment to, or waiver from, a provision of the Code of Business Conduct and Ethics that applies to any of our directors or executive officers.

PROXY ACCESS

Our Amended and Restated By-Laws (the "By-Laws") provide for the ability of a shareholder, or a group of up to 20 shareholders, owning at least three percent of the Company's outstanding Class A common stock continuously for at least three years, to nominate and include in the Company's proxy materials director nominees constituting up to the greater of two nominees or 20% of the number of directors on the Board that the Class A common shareholders are entitled to elect, provided that the shareholders and the nominees satisfy the requirements in our By-Laws.

MAJORITY VOTE STANDARD FOR ELECTION OF DIRECTORS

Our By-Laws provide for a majority of votes cast standard for the election of directors in an uncontested election. The majority of votes cast standard for purposes of the election of director nominees means that in order for a director to be elected, the number of votes cast FOR a director's election must exceed the number of votes cast AGAINST that director's election. Any director who, in an uncontested election, receives a greater number of AGAINST votes than FOR votes must promptly tender his or her resignation to the Board, subject to its acceptance. The Governance and Nominating Committee will promptly consider the tendered resignation and recommend to the Board whether to accept or reject it. Both the Governance and Nominating Committee and the Board may consider any factors they deem appropriate and relevant to their actions. The Board will act on the tendered resignation, taking into account the Governance and Nominating Committee's recommendation. The affected director cannot participate in any part of the process. We will publicly disclose the Board's decision by a press release, a filing with the SEC or other broadly disseminated means of communication within 90 days after the shareholders' vote has been certified.

In a contested election (in which the number of nominees exceeds the number of directors to be elected), the standard for election of directors will be a plurality of the votes cast by the holders of shares entitled to vote on the election of directors, provided a quorum is present.

NOMINATIONS FOR DIRECTORS

The Governance and Nominating Committee will consider director nominees recommended by shareholders. A shareholder who wishes to recommend a director candidate in this manner should send such recommendation to our Secretary at 225 West Washington Street, Indianapolis, Indiana 46204, who will forward it to the Governance and Nominating

Committee. Any such recommendation shall include a description of the candidate's qualifications for Board service, the candidate's written consent to be considered for nomination and to serve if nominated and elected, as well as the addresses and telephone numbers for contacting the shareholder and the candidate for more information. A shareholder who wishes to nominate an individual as a director candidate at an annual meeting of shareholders, rather than either recommend the individual to the Governance and Nominating Committee as a nominee or utilize the proxy access process described above and set forth in Section 1.11 of our By-Laws, shall comply with the advance notice requirements for shareholder nominations set forth in Section 1.10 of our By-Laws.

Our Governance Principles provide that all candidates for election as members of the Board should possess high personal and professional ethics, integrity and values and be committed to representing the long-term interests of our shareholders and otherwise fulfilling the responsibilities of directors as described in our Governance Principles. In 2016, we amended our Governance Principles to clearly reflect and communicate the Board's long-standing diversity goals including, without limitation, the pursuit of racial and gender diversity taking into account the skills and other attributes the Board believes are required for any new director. Our Governance Principles further provide that if our directors simultaneously serve on more than four boards of public companies, including our Board, then the Board or Governance and Nominating Committee must determine that serving on more than four public company boards does not impair the ability of the director to serve as an effective member of our Board. In recommending candidates to the Board for election as directors, the Governance and Nominating Committee will consider the foregoing minimum qualifications as well as each candidate's credentials, keeping in mind our desire, as stated in our Governance Principles, to have a Board representing diverse experiences and backgrounds, as well as expertise in or knowledge of specific areas that are relevant to our business activities. Although we do not have term limits or a mandatory retirement age for our directors, we do believe that periodic board refreshment is beneficial. Consistent with this belief, in the last five years we have appointed four new directors, including two new directors in the last two years.

COMMUNICATIONS WITH THE BOARD

The Board has implemented a process by which our shareholders and other interested parties may communicate with one or more members of our Board, its committees, the Lead Independent Director, or the independent directors as a group in a writing addressed to Simon Property Group, Inc., Board of Directors, c/o Secretary, 225 West Washington Street, Indianapolis, Indiana 46204. The Board has instructed our Secretary to promptly forward all such communications to the specified addressees thereof.


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CORPORATE GOVERNANCE OF THE COMPANY

SHAREHOLDER ENGAGEMENT AND OUTREACH

The Company has continued to reach out to and engage with shareholders, over the course of the past year, representing well over 50% of the shares outstanding and entitled to vote at the 2019 Annual Meeting, concerning, among other things, executive compensation and sustainability. In addition, since our 2018 annual meeting and before mailing this Proxy Statement, our executive officers have considered the input received from shareholders (in face-to-face discussions, conference calls, and/or written communication).

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") requires our directors, executive officers and beneficial owners of more than 10% of our capital stock to file reports of ownership and changes of ownership with the SEC and the NYSE. Based on our records and other information, we believe that during the year ended December 31, 2018, all applicable Section 16(a) filing requirements were met.

TRANSACTIONS WITH RELATED PERSONS

On an annual basis, each director and executive officer is obligated to complete a director and officer questionnaire, which requires disclosure of any transactions with us in which the director or executive officer, or any member of his or her immediate family, has or will have an interest. Pursuant to our Code of Business Conduct and Ethics at codeofconduct.simon.com , which is also available in the Governance section of our website at investors.simon.com , the Audit Committee must review and approve all related person transactions in which any executive officer, director, director nominee or more than 5% shareholder of the Company, or any of their immediate family members, had, has or will have a direct or indirect material interest. Pursuant to the charter of the Audit Committee, which is available in the Governance section of our website at investors.simon.com , the Audit Committee may not approve a related person transaction unless (1) it is in, or not inconsistent with, our best interests and (2) where applicable, the terms of such transaction are at least as favorable to us as could be obtained from an unrelated third party. Our Restated Certificate of Incorporation requires that at least a majority of our directors be neither our employees nor members or affiliates of members of the Simon family. Our

Restated Certificate of Incorporation further requires that transactions involving the Company, individually or in our capacity as general partner of our subsidiary, Simon Property Group, L.P. (the "Operating Partnership"), and any entity in which any of the Simons has an interest must, in addition to any other vote that may be required, be approved in advance by a majority of such independent directors. We currently have ten independent directors serving on the Board.

Our General Counsel is charged with reviewing any conflict of interest involving any other employee.

TRANSACTIONS WITH THE SIMONS

Pursuant to management agreements that provide for our receipt of a management fee and reimbursement of our direct and indirect costs, we have managed since 1993 two shopping centers owned by entities in which Mr. David Simon and Mr. Herbert Simon have ownership interests that were not contributed to the Operating Partnership. In addition, in 2018 we assisted Melvin Simon & Associates, Inc. ("MSA") and certain of its affiliates with placement of the property and casualty insurance programs required for certain retail and other commercial buildings and improvements owned by MSA or its affiliates. MSA is owned 30.94% by trusts for the benefit of Mr. Herbert Simon, 3.04% by a trust for the benefit of Mr. David Simon, and by certain other shareholders. In 2018, we received $3,960,053 in fees and reimbursements from MSA and its affiliates for rendering management and insurance-related services to MSA and its affiliates. These agreements have been reviewed and approved by the Audit Committee. In 2018, we reimbursed Mr. David Simon $2,644,038 for the Company-related business use of his personal aircraft. Our reimbursement for use of Mr. David Simon's personal aircraft is based upon a below-market hourly cost of operating the aircraft and the verified number of hours used for Company business, plus reimbursement for certain out-of-pocket expenses. These reimbursements were reviewed and approved by the Audit Committee.

We provide MSA with office space and legal, human resource administration, property specific financing and other support services, and MSA paid us $600,000 for these services in 2018, which is net of our reimbursement of Mr. Herbert Simon for costs incurred to operate his personal aircraft when used for Company related business purposes. These payments and reimbursements were reviewed and approved by the Audit Committee.


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PROPOSAL 1:       Election of Directors

The Board currently consists of thirteen members. Based on the recommendation of the Governance and Nominating Committee, the Board has nominated the following ten persons listed as "Nominees for Director to be Elected by Holders of Voting Shares." All of the nominees are current directors.

We expect each nominee for election as a director named in this Proxy Statement will be able to serve if elected. If any nominee is not able to serve, proxies will be voted in favor of the remainder of those nominated and may be voted for substitute nominees.

The names, principal occupations and certain other information about the nominees for director, as well as key experiences, qualifications, attributes and skills that led the Governance and Nominating Committee to conclude that such person is currently qualified to serve as a director, are set forth on the following pages.

NOMINEES FOR DIRECTOR TO BE ELECTED BY HOLDERS OF VOTING SHARES

GRAPHICClick to enlarge   THE BOARD RECOMMENDS THAT SHAREHOLDERS VOTE " FOR " THE FOLLOWING INDEPENDENT DIRECTOR NOMINEES:

 

PHOTOClick to enlarge   Glyn F. Aeppel
Age: 60
Director since: 2016
Committees Served: Governance and Nominating
Other Public Directorships: AvalonBay
Communities, Inc.
  PHOTOClick to enlarge   Larry C. Glasscock
Age: 70
Director since: 2010
Committees Served: Lead Independent Director, Audit, Governance and Nominating
Other Public Directorships: Zimmer Biomet Holdings, Inc. and Sysco Corporation

President and Chief Executive Officer of Glencove Capital, a lifestyle hospitality investment and advisory company that she founded in 2010. From October 2008 to May 2010, Ms. Aeppel served as Chief Investment Officer of Andre Balazs Properties, an owner, developer and operator of lifestyle luxury hotels. From April 2006 to October 2008, she served as Executive Vice President of Acquisitions and Development for Loews Hotels and was a member of its executive committee. From April 2004 to April 2006, she was a principal of Aeppel and Associates, a hospitality advisory development company, during which time she assisted Fairmont Hotels and Resorts in expanding in the United States and Europe. Prior to April 2004, Ms. Aeppel held executive positions with Le Meridien Hotels, Interstate Hotels & Resorts, Inc., FFC Hospitality, LLC, Holiday Inn Worldwide and Marriott Corporation. Ms. Aeppel currently serves on the board of directors of AvalonBay Communities, Inc., where she is a member of the nominating and governance committee and chair of the investment and finance committee. She also serves on the board of Exclusive Resorts, LLC, Gilbane Inc., and Concord Hospitality Enterprises, all privately held companies. Ms. Aeppel previously served on the boards of Key Hospitality Acquisition Corporation, Loews Hotels Corporation and Sunrise Senior Living, Inc.

SPECIFIC QUALIFICATIONS AND EXPERIENCE OF PARTICULAR RELEVANCE TO OUR COMPANY
Ms. Aeppel has more than 30 years of experience in property acquisitions, development and financing. Ms. Aeppel has experience in both public and private companies focusing on the acquisition, operation and branding of hotel properties, including serving as Chief Investment Officer at Andre Balazs Properties and Executive Vice President, Acquisitions and Development, of Loews Hotel Corporation. She is a member of our Governance and Nominating Committee.


 

Former Chairman and CEO of Anthem, Inc., a healthcare insurance company, from November 2005 to March 2010. Mr. Glasscock also served as President and Chief Executive Officer of WellPoint, Inc. from 2004 to 2007. Mr. Glasscock previously served as Chairman, President and Chief Executive Officer of Anthem, Inc. from 2003 to 2004 and served as President and Chief Executive Officer of Anthem, Inc. from 2001 to 2003. Mr. Glasscock also previously served as a director of Anthem, Inc., and as a director for Sprint Nextel Corporation until 2013. Mr. Glasscock is currently the non-executive Chairman of the Board for Zimmer Biomet Holdings, Inc. where he is a member of the audit committee and the corporate governance committee. He is also a director of Sysco Corporation where he is the chairman of the corporate governance and nominating committee, a member of the executive committee and a member of the compensation committee.

SPECIFIC QUALIFICATIONS AND EXPERIENCE OF PARTICULAR RELEVANCE TO OUR COMPANY
Mr. Glasscock served as the Chief Executive Officer of the nation's leading health benefits company for many years. He has experience in leading a large public company, setting and implementing strategic plans, developing and implementing turnaround and growth strategies, and developing talent and participating in successful leadership transitions. Mr. Glasscock also has experience leading acquisitions of companies. In addition, he worked in financial services for 20 years and can identify meaningful metrics to assess a company's performance. He also serves, and has served for over 15 years, as a director of other public companies. Mr. Glasscock serves as our Lead Independent Director and serves on our Governance and Nominating Committee and Audit Committee. The Board has determined that he is an "audit committee financial expert".


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PROPOSAL 1:      Election of Directors

PHOTOClick to enlarge   Karen N. Horn, Ph.D.
Age: 75
Director since: 2004
Committees Served: Governance and Nominating
(Chair)
Other Public Directorships: None
  PHOTOClick to enlarge   Allan Hubbard
Age: 71
Director since: 2009
Committees Served: Compensation, Governance and Nominating
Other Public Directorships: None

Dr. Horn has served as Senior Managing Director of Brock Capital Group, a corporate advisory and investment banking firm, since 2003. Retired President, Global Private Client Services and Managing Director of Marsh, Inc., a subsidiary of Marsh & McLennan Companies, having served in these positions from 1999 to 2003. Prior to joining Marsh, she was Senior Managing Director and Head of International Private Banking at Bankers Trust Company; Chairman and Chief Executive Officer, Bank One, Cleveland, N.A.; President of the Federal Reserve Bank of Cleveland; Treasurer of Bell of Pennsylvania; and Vice President of First National Bank of Boston. She is also Chairman of the National Association of Corporate Directors, Vice Chairman of the U.S. Russia Foundation, and the Chairman and a member of the board of the National Bureau of Economic Research. She previously served as a director of Georgia-Pacific Corporation, Fannie Mae and Eli Lilly and Company, and in the past five years she served as a director of Norfolk Southern Corporation and T. Rowe Price Mutual Funds.

SPECIFIC QUALIFICATIONS AND EXPERIENCE OF PARTICULAR RELEVANCE TO OUR COMPANY
Dr. Horn has more than 30 years of experience in international finance and management, including her service as President of the Federal Reserve Bank of Cleveland and as a senior executive of a number of financial institutions. These experiences provide her with expertise in financial management and economic policy and an in-depth knowledge of the capital markets in which we actively participate. Dr. Horn has previously served as a director of several other publicly-held companies. She is a member of our Governance and Nominating Committee, which she chairs.


 

Co-Founder and Chairman and Partner of E&A Companies, a privately-held holding company that acquires and operates established companies, since 1977. Mr. Hubbard served as Assistant to the President for Economic Policy and director of the National Economic Council for the George W. Bush administration. He also served as Executive Director of the President's Council on Competitiveness for the George H.W. Bush administration. Mr. Hubbard previously served as a director of Acadia Healthcare, Anthem, Inc., PIMCO Equity Series, and PIMCO Equity Series VIT.

SPECIFIC QUALIFICATIONS AND EXPERIENCE OF PARTICULAR RELEVANCE TO OUR COMPANY
Mr. Hubbard has more than 30 years experience as an entrepreneur having founded and led a company that acquires and grows companies in North America and Europe. He served on the board of directors of a major, publicly-held healthcare company for a number of years during which time he served on that board's audit, compensation and governance committees. Mr. Hubbard also has extensive government and economic policy experience, having held key economic positions in the administrations of two U.S. Presidents. He is an honors graduate of Harvard Business School with an emphasis in finance and an honors graduate of Harvard Law School. Mr. Hubbard serves on our Compensation Committee and Governance and Nominating Committee.

 
    
           
PHOTOClick to enlarge   Reuben S. Leibowitz
Age: 71
Director since: 2005
Committees Served: Compensation (Chair), Audit
Other Public Directorships: None
  PHOTOClick to enlarge   Gary M. Rodkin
Age: 66
Director since: 2015
Committees Served: Governance and Nominating
Other Public Directorships: McCormick & Company, Incorporated

Managing Member of JEN Partners, a private equity firm, since 2005. Mr. Leibowitz was a Managing Director of Warburg Pincus from 1984 to 2005. He was a director of Chelsea Property Group, Inc. from 1993 until it was acquired by the Company in 2004 and previously served as a director of AV Homes, Inc.

SPECIFIC QUALIFICATIONS AND EXPERIENCE OF PARTICULAR RELEVANCE TO OUR COMPANY
Mr. Leibowitz led a major private equity firm's real estate activities for many years and in that role was also responsible for implementing long-term corporate strategies. Mr. Leibowitz practiced 15 years as a CPA, including a number of years specializing in tax issues, and is an attorney. He has an in-depth understanding of our Premium Outlets® platform, having served as a director of Chelsea Property Group, the publicly-held company we acquired in 2004. He serves on our Audit Committee and Compensation Committee, which he chairs. The Board has determined that he is an "audit committee financial expert".


 

Chief Executive Officer and member of the board of ConAgra Foods, Inc. from 2005 until his retirement in May 2015. Mr. Rodkin was Chairman and Chief Executive Officer of PepsiCo Beverages and Foods North America from February 2003 to June 2005. Mr. Rodkin joined PepsiCo in 1998, after it acquired Tropicana, where Mr. Rodkin had served as President since 1995. From 1979 to 1995, Mr. Rodkin held marketing and general management positions of increasing responsibility at General Mills, with his last three years at the company as President, Yoplait-Colombo. Mr. Rodkin currently serves on the board of directors of McCormick & Company, Incorporated, where he is a member of their Nominating/Corporate Governance committee. In the past five years, he has served as a director of ConAgra Foods, Inc. and Avon Products, Inc.

SPECIFIC QUALIFICATIONS AND EXPERIENCE OF PARTICULAR RELEVANCE TO OUR COMPANY
Mr. Rodkin has extensive experience in the leadership and management of a large packaged food company and expertise in branding and marketing of food and food service operations globally as the former Chief Executive Officer of ConAgra Foods,  Inc. Mr. Rodkin serves on our Governance and Nominating Committee.


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PROPOSAL 1:      Election of Directors

PHOTOClick to enlarge   Stefan M. Selig
Age: 56
Director since: 2017
Committees Served: Audit, Compensation
Other Public Directorships: Entercom Communications Corp., Safehold Inc. and Tuscan Holdings Corp.
  PHOTOClick to enlarge   Daniel C. Smith, Ph.D.
Age: 61
Director since: 2009
Committees Served: Compensation
Other Public Directorships: None

Founder of BridgePark Advisors LLC, a strategic advisory firm. Prior to that Mr. Selig served as the Undersecretary of the Commerce for International Trade for the U.S. Department of Commerce from 2014 - 2016. Mr. Selig previously was with Bank of America Merrill Lynch from 1999 - 2014, ultimately serving as Executive Vice Chairman of Global Corporate and Investment Banking. Mr. Selig currently serves on the board of directors of Entercom Communications Corp., Tuscan Holdings Corp., and Safehold Inc. where he is the lead independent director and serves on each of the audit, compensation and nominating and governance committees.

SPECIFIC QUALIFICATIONS AND EXPERIENCE OF PARTICULAR RELEVANCE TO OUR COMPANY
Mr. Selig is a highly accomplished banker and senior executive who has served in prominent leadership roles in both the private and public sectors. Mr. Selig also has extensive government and economic policy experience, having served as Undersecretary of the Commerce for International Trade for the U.S. Department of Commerce. Mr. Selig serves on our Audit Committee and our Compensation Committee. The Board has determined that he is an "audit committee financial expert".


 

President and Chief Executive Officer of the Indiana University Foundation and Clare W. Barker Professor of Marketing at Indiana University, Kelley School of Business (the "Kelley School"). Served as Dean of the Kelley School from 2005 - 2012 and as Chief Executive Officer of the Indiana University Foundation since 2012. Dr. Smith joined the faculty of the Kelley School in 1996 and has served as Chair of the Marketing Department, Chair of the MBA Program, and Associate Dean of Academic Affairs.

SPECIFIC QUALIFICATIONS AND EXPERIENCE OF PARTICULAR RELEVANCE TO OUR COMPANY
Dr. Smith has spent over 30 years teaching, conducting research, and consulting in the areas of marketing strategy, brand management, financial management, compensation, human resource development and corporate governance. He served as Dean of one of the country's top-rated and largest business schools and now is the Chief Executive Officer of one of the nation's largest university foundations with $2.0 billion of assets. Both as Dean and Foundation Chief Executive Officer, he was/is responsible for financial oversight and long-term financial planning, hiring and retention policies, compensation policies, public relations and overall long-term strategy. He serves on our Compensation Committee.

 
    
           
PHOTOClick to enlarge   J. Albert Smith, Jr.
Age: 78
Director since: 1993
Committees Served: Audit (Chair), Compensation
Other Public Directorships: None
  PHOTOClick to enlarge   Marta R. Stewart
Age: 61
Director since: 2018
Committees Served: Audit
Other Public Directorships: The Raytheon Company

Chairman, Chase Bank, a national financial institution, in Central Indiana since 2014 and Managing Director of J.P. Morgan Private Bank since 2005. Mr. Smith was President of Bank One Central Indiana from 2001 to 2005; Managing Director of Banc One Corporation from 1998 to 2001; President of Bank One, Indiana, NA from 1994 to 1998; and President of Banc One Mortgage Corporation from 1974 to 1994.

SPECIFIC QUALIFICATIONS AND EXPERIENCE OF PARTICULAR RELEVANCE TO OUR COMPANY
Mr. Smith has served as Chairman, President and Managing Director of the Midwest operations of a major financial institution for a number of years during which time he has been involved in real estate lending activities. Through these experiences he has developed expertise in financial management and credit markets. He served as our Lead Independent Director until March 2014 and currently serves on our Compensation Committee and our Audit Committee, which he chairs. The Board has determined that he is an "audit committee financial expert".


 

Executive Vice President and Chief Financial Officer of Norfolk Southern Corporation, one of the nation's premier transportation companies, from 2013 until her retirement in August 2017. Mrs. Stewart joined Norfolk Southern Corporation in 1983 and served in several finance positions before being named Vice President and Controller in 2003 and then Vice President and Treasurer in 2009. Mrs. Stewart currently serves on the board of directors of The Raytheon Company where she is a member of the audit committee and of the public policy and corporate responsibility committee.

SPECIFIC QUALIFICATIONS AND EXPERIENCE OF PARTICULAR RELEVANCE TO OUR COMPANY
Mrs. Stewart has more than 30 years of experience in finance and served as Chief Financial Officer for one of the largest railway companies in the world. In that role, Mrs. Stewart gained extensive experience in the leadership and management as well as expertise in accounting systems and controls of a Fortune 500 company traded on the NYSE. Mrs. Stewart serves on our Audit Committee. The Board has determined that she is an "audit committee financial expert".


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PROPOSAL 1:      Election of Directors

NOMINEES FOR DIRECTOR TO BE ELECTED BY THE VOTING TRUSTEES WHO VOTE THE CLASS B COMMON STOCK

The voting trustees who vote the Class B common stock, and who have the right to elect four directors, have nominated the three persons listed below as "Nominees for Director to be Elected by the Voting Trustees Who Vote the Class B Common Stock". All of the nominees are currently Class B directors.

The voting trustees who vote the Class B common stock have agreed to elect Richard S. Sokolov to the Board. The voting trustees have an agreement requiring that each of them vote for each other as Class B director nominees.

                
PHOTOClick to enlarge   David Simon
Class B Director Nominee
Age: 57
Director since: 1993
Other Public Directorships: Klépierre, S.A
  PHOTOClick to enlarge   Richard S. Sokolov
Class B Director Nominee
Age: 69
Director since: 1996
Other Public Directorships: None

Chairman of the Company since 2007, CEO of the Company or its predecessor since 1995 and President of the Company since February 2019; a director of the Company or its predecessor since its incorporation in 1993; and President of the Company's predecessor from 1993 to 1996. From 1988 to 1990, Mr. Simon was Vice President of Wasserstein Perella & Company. From 1985 to 1988, he was an Associate at First Boston Corp. In the past five years, he previously served as a director of Washington Prime Group. He is the son of the late Mr. Melvin Simon and the nephew of Mr. Herbert Simon.

SPECIFIC QUALIFICATIONS AND EXPERIENCE OF PARTICULAR RELEVANCE TO OUR COMPANY
Mr. Simon has served as our CEO or the CEO of our predecessor for over 20 years. During that time he has provided leadership in the development and execution of our successful growth strategy, overseeing numerous strategic acquisitions that have been consolidated into what is recognized as the nation's leading retail real estate company. He gained experience in mergers and acquisitions while working at major Wall Street firms before joining his father and uncle.


 

Vice Chairman of the Company since February 2019 and a director of the Company or its predecessor since 1996. President and Chief Operating Officer of the Company or its predecessor from 1996 to February 2019. President and Chief Executive Officer of DeBartolo Realty Corporation from its incorporation in 1994 until it merged with our predecessors in 1996. Mr. Sokolov joined its predecessor, The Edward J. DeBartolo Corporation, in 1982 as Vice President and General Counsel and was named Senior Vice President, Development and General Counsel in 1986. In the past five years, he previously served as a director of Washington Prime Group.

SPECIFIC QUALIFICATIONS AND EXPERIENCE OF PARTICULAR RELEVANCE TO OUR COMPANY
Mr. Sokolov has served as our Vice Chairman since February 2019 and a director of the Company or its predecessor since 1996. He served as President and Chief Operating Officer of the Company or its predecessor from 1996, immediately following our acquisition of DeBartolo Realty Corporation, to February 2019. Mr. Sokolov had served as Chief Executive Officer and President of DeBartolo Realty Corporation and Senior Vice President Development and General Counsel of its predecessor operations for a number of years. Mr. Sokolov is a past Chairman of the International Council of Shopping Centers ("ICSC") and previously served as a trustee and a member of the ICSC Nominating Committee.

 
    
           
PHOTOClick to enlarge   Herbert Simon
Class B Director Nominee
Age: 84
Director since: 1993
Other Public Directorships: The Cheesecake Factory
Incorporated
       

Chairman Emeritus of the Board of the Company since 2007. Co-Chairman of the Board of the Company or its predecessor from 1995 to 2007. Mr. Herbert Simon was Chief Executive Officer and a director of the Company's predecessor from its incorporation in 1993 to 1995. He also serves on the Board of Governors for the National Basketball Association ("NBA") and as Chairman of the Board of MSA. He is the uncle of Mr. David Simon.

SPECIFIC QUALIFICATIONS AND EXPERIENCE OF PARTICULAR RELEVANCE TO OUR COMPANY
Mr. Herbert Simon is our co-founder and Chairman Emeritus. The retail real estate business that he and his brother, the late Mr. Melvin Simon, started decades ago established the foundation for all of our current operations and record of achievement. Mr. Herbert Simon's leadership of the Indiana Pacers NBA basketball franchise has led to his service on the Board of Governors of the NBA.


 

 

 

 


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PROPOSAL 1:      Election of Directors

MEETINGS AND COMMITTEES OF THE BOARD

MEETINGS AND ATTENDANCE

Our business, property and affairs are managed under the direction of our Board. Members of our Board are kept informed of our business through discussions with our Chairman and CEO, other executive officers, and our Lead Independent Director, by reviewing materials provided to them concerning the business, by visiting our offices and properties, and by participating in meetings of the Board and its committees. Directors are also expected to use reasonable efforts to attend the annual meeting of shareholders.

All of our directors attended the 2018 annual meeting. During 2018, the Board met five times, including one telephonic meeting.

All of our directors participated in more than 75% of the aggregate number of meetings of the Board and the committees on which they served in 2018.

EXECUTIVE SESSIONS OF INDEPENDENT DIRECTORS

The independent directors meet in executive session without management present in connection with each regularly scheduled non-telephonic Board meeting as well as when the need arises. During 2018, the independent directors had meetings after four Board meetings. The Lead Independent Director presided over three of these meetings. The Chairman of the Audit Committee presided over one of these meetings.

The Board's Lead Independent Director is appointed by the independent members of the Board and the responsibilities of the Lead Independent Director are discussed in the section of this Proxy Statement titled "Corporate Governance of the Company—Board Leadership Structure."


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PROPOSAL 1:      Election of Directors

COMMITTEE FUNCTION AND MEMBERSHIP

THE AUDIT COMMITTEE

  Members:
J. Albert Smith, Jr. (Chair)
Larry C. Glasscock
Reuben S. Leibowitz
Stefan M. Selig
Marta R. Stewart

Nine meetings during 2018







The Audit Committee assists the Board in monitoring the integrity of our financial statements, the qualifications, independence and performance of our independent registered public accounting firm, the performance of our internal audit function and our compliance with legal and regulatory requirements. The Audit Committee has sole authority to appoint, or replace our independent registered public accounting firm and pre-approves the auditing services and permitted non-audit services to be performed by our independent registered public accounting firm, including the fees and terms thereof. The Audit Committee has authority to retain legal, accounting or other advisors. The Audit Committee reviews and discusses with management and our independent registered public accounting firm our annual audited financial statements, our quarterly earnings releases and financial statements, significant financial reporting issues and judgments made in connection with the preparation of our financial statements and any major issues regarding the adequacy of our internal controls. It also issues the report on its activities which appears in this Proxy Statement. The charter of the Audit Committee requires that each member meet the independence and experience requirements of the NYSE, the Exchange Act and the rules and regulations of the SEC.

The Board has determined that each of the current members of the Audit Committee qualifies as an "audit committee financial expert" as defined by rules of the SEC.

THE COMPENSATION COMMITTEE

  Members:
Reuben S. Leibowitz (Chair)
Allan Hubbard
Stefan M. Selig
Daniel C. Smith, Ph.D.
J. Albert Smith, Jr.

Five meetings during 2018







The Compensation Committee (1) sets remuneration levels for our executive officers, (2) reviews significant employee benefit programs, (3) establishes and administers our executive compensation program and our stock incentive plan, (4) reviews and discusses with management the Compensation Discussion and Analysis, and, if appropriate, recommends its inclusion in our Annual Report and Proxy Statement, and (5) issues the report on its activities which appears in this Proxy Statement. The charter of the Compensation Committee requires that each member meet the independence requirements of the NYSE and the rules and regulations of the SEC.

The Compensation Committee has authority to retain the advice and assistance of compensation consultants and legal, accounting or other advisors. The Compensation Committee retained its current consultant, Semler Brossy Consulting Group, LLC ("Semler Brossy"), in December 2011. Semler Brossy does not provide any other services to management of the Company. The consultant assists the Compensation Committee in the review and design of our executive compensation program. No member of the Compensation Committee during 2018 was an officer, employee or former officer of us or any of our subsidiaries or had any relationship requiring disclosure in this Proxy Statement pursuant to SEC regulations. None of our executive officers served as a member of a compensation committee or a director of another entity under the circumstances requiring disclosure in this Proxy Statement pursuant to SEC regulations.

THE GOVERNANCE AND NOMINATING COMMITTEE

  Members:
Karen N. Horn, Ph.D. (Chair)
Glyn F. Aeppel
Larry C. Glasscock
Allan Hubbard
Gary M. Rodkin

Three meetings during 2018







The Governance and Nominating Committee nominates persons to serve as directors in accordance with our Governance Principles, and proscribes appropriate qualifications for Board members. The Committee develops and recommends to the Board the Governance Principles applicable to the Company and the Board, leads the Board in its annual evaluation of the Board's performance, oversees the assessment of the independence of each director, reviews compliance with stock ownership guidelines and makes recommendations regarding compensation for non-employee directors. Members of the Governance and Nominating Committee are responsible for screening director candidates, but may solicit advice from our CEO and other members of the Board. The Governance and Nominating Committee has the authority to retain legal, accounting or other advisors, and has sole authority to approve the fees and other terms and conditions associated with retaining any such external advisors. The charter of the Governance and Nominating Committee requires that each member meet the independence requirements of the NYSE, and any other legal and regulatory requirements.


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PROPOSAL 1:      Election of Directors

 

DIRECTOR COMPENSATION

COMPENSATION OF INDEPENDENT DIRECTORS

The Board believes that competitive compensation arrangements are necessary to attract and retain qualified independent directors. On February 12, 2018, after conducting an extensive review, including analyzing the compensation practices of leading companies of similar size to the Company, under supervision of the Governance and Nominating Committee, and upon recommendation of the Compensation Committee's independent compensation consultant, Semler Brossy, the Board approved changes to the compensation arrangements for independent directors of the Company. These were the first changes made to the overall compensation program for the Board's independent directors since 2015.

The Company continues to compensate its independent directors through the use of annual retainers. After the independent directors are elected, the Company awards each independent director an annual cash retainer of $110,000, paid quarterly, and makes a restricted stock award with a grant date value of $175,000 that vests on the first anniversary of the grant date. The restricted stock grants for 2019 will only be made if the Simon Property Group, L.P. 2019 Stock Incentive Plan (the "2019 Plan") is approved by the Company's shareholders at the 2019 Annual Meeting. In addition to the annual cash and restricted stock retainers for service as a director described above, each independent director receives additional annual retainers based on his or her role(s) as a committee chairperson, a committee member or Lead Independent Director. The chairperson of the Audit Committee and the chairperson of the Compensation Committee each are paid an annual retainer of $35,000. The chairperson of the Governance and Nominating Committee is paid an annual retainer of $25,000. Each member of the Audit Committee and Compensation Committee is paid a $15,000 annual retainer. Each member of the Governance and Nominating Committee is paid a $10,000 annual retainer. The annual retainer for the Lead Independent Director is $50,000. These committee chairperson, committee member and Lead Independent Director retainers are paid 50% in cash and 50% in restricted stock.

DIRECTOR STOCK OWNERSHIP GUIDELINES

We have a stringent stock retention policy that further aligns our directors' financial interests with those of our shareholders. The Company believes that it is advisable for its independent directors to retain a fixed dollar amount of Company common stock as opposed to a fixed number of common shares. The stock ownership guidelines for each of the Company's independent directors require that each independent director own $850,000 worth of common stock of the Company (or the equivalent amount of limited partnership units of the Operating Partnership) by no later than six years after the date he or she is elected to the Board. Stock options and unvested shares of restricted stock do not count toward this requirement. The ownership guidelines also require independent directors to hold shares acquired upon the vesting of restricted stock awards received as compensation for their service on the Board and its Committees, together with all dividends paid on such awards utilized to purchase additional shares of the Company's common stock, in the director account of the Company's deferred compensation plan until the director retires, dies or becomes disabled, or otherwise no longer serves as a director.

Any director who is prohibited by law or by applicable regulation of his or her employer from having an ownership interest in our securities will be exempt from this requirement until the restriction is lifted, at which time he or she will have the following six-year period to comply with the ownership guidelines. The Board may grant exceptions on a case by case basis.

As of March 15, 2019, all independent directors of the Board have met or, within the applicable period, are expected to meet, these stock ownership guidelines.


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PROPOSAL 1:      Election of Directors

2018 INDEPENDENT DIRECTOR COMPENSATION

The following table sets forth information regarding the compensation we paid to our independent directors for 2018:

NAME (1)
FEES EARNED OR
PAID IN CASH

STOCK AWARDS (2)
TOTAL

Glyn F. Aeppel

$ 111,411 $ 180,033 $ 291,444

Larry C. Glasscock

$ 143,911 $ 212,543 $ 356,454

Karen N. Horn, Ph.D.

$ 118,911 $ 187,547 $ 306,458

Allan Hubbard

$ 118,911 $ 187,547 $ 306,458

Reuben S. Leibowitz

$ 131,411 $ 200,122 $ 331,533

Gary M. Rodkin

$ 111,411 $ 180,033 $ 291,444

Stefan M. Selig

$ 118,774 $ 190,154 $ 308,928

Daniel C. Smith, Ph.D.

$ 113,911 $ 182,640 $ 296,551

J. Albert Smith, Jr.

$ 131,411 $ 200,122 $ 331,533

Marta R. Stewart

$ 101,369 $ 220,792 $ 322,161
(1)
As of December 31, 2018, the independent directors owned shares of restricted stock subject to vesting requirements in the following amounts: Glyn F. Aeppel—1,174; Larry C. Glasscock—1,386; Karen N. Horn, Ph.D.—1,223; Allan Hubbard—1,223; Reuben S. Leibowitz—1,305; Gary M. Rodkin—1,174; Stefan M. Selig—1,240; Daniel C. Smith, Ph.D.—1,191; J. Albert Smith, Jr.—1,305; and Marta R. Stewart—1,427.


Mr. David Simon, Mr. Richard S. Sokolov and Mr. Herbert Simon, who were also directors during 2018, are not included in this table because they are not independent directors and did not receive any compensation for their service as directors. In 2018, Mr. Herbert Simon received $100,000 in employment compensation for his service as our Chairman Emeritus. The compensation paid to Mr. David Simon and Mr. Sokolov as executive officers of the Company is shown in the 2018 Summary Compensation Table in this Proxy Statement.

(2)
Represents the ASC 718 grant date fair value of the restricted stock awarded to the directors, determined based on the closing price of our common stock as reported by the NYSE on the date of grant. Restricted stock granted to directors must be held in the director deferred compensation account and dividends on the restricted shares must be reinvested in additional shares of common stock which also must be held in the director deferred compensation account. One of our directors elected to defer his cash compensation in 2018.


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PROPOSAL 1:      Election of Directors

OWNERSHIP OF EQUITY SECURITIES OF THE COMPANY

DIRECTORS AND EXECUTIVE OFFICERS

As of March 15, 2019, the existing directors, director nominees and executive officers identified below:

Owned beneficially the indicated number and percentage of common shares and Class B common stock treated as a single class; and

Owned beneficially the indicated number and percentage of units which are exchangeable for common shares on a one-for-one basis or cash, as determined by the Company. The number of units includes earned and fully vested performance-based Long Term Incentive Plan ("LTIP") units which are convertible at the option of the holder into units on a one-for-one basis.

Unless otherwise indicated in the footnotes to the table, shares or units are owned directly and the indicated person has sole voting and investment power.

 
  SHARES AND UNITS
BENEFICIALLY OWNED
  UNITS BENEFICIALLY
OWNED
NAME
  NUMBER (1)(2)(3)
  PERCENT (4)
  NUMBER
  PERCENT (5)

David Simon (6)

  28,110,424   8.38%   26,461,548   7.44%

Glyn F. Aeppel

    3,012   *    

Larry C. Glasscock

  12,823   *



Karen N. Horn, Ph.D.

    20,198   *    

Allan Hubbard

  13,254   *



Reuben S. Leibowitz (7)

    35,561   *    

Gary M. Rodkin

  3,811   *



Stefan M. Selig

    1,794   *    

Herbert Simon (8)

  28,110,424   8.38%   26,461,548   7.44%

Daniel C. Smith, Ph.D.

    12,386   *    

J. Albert Smith, Jr.

  42,271   *



Richard S. Sokolov

    818,262   *   489,561   *

Marta R. Stewart

  1,473   *



Steven E. Fivel (9)

    92,474   *   75,472   *

Brian J. McDade

  4,793   *



John Rulli (10)

    243,449   *   200,374   *

All Directors and executive officers as a group (18 people) (11)

  29,421,384   8.75%   27,226,955   7.65%
*
Less than one percent

(1)
Includes the following common shares that may be issued upon exchange of units (including vested LTIP units) held by the following persons on March 15, 2019: David Simon, Herbert Simon and other members of the MSA group (as defined in the Principal Shareholders table on page 20—26,461,548; Richard S. Sokolov—489,561; John Rulli—200,374; Steven E. Fivel—75,472; and all directors and executive officers as a group—27,226,955. Units are exchangeable either for common shares on a one-for-one basis or for cash as determined by the Company.

(2)
Includes the following restricted shares which are subject to vesting requirements: Glyn F. Aeppel—1,174; Larry C. Glasscock—1,386; Karen N. Horn, Ph.D.—1,223; Allan Hubbard—1,223; Reuben S. Leibowitz—1,305; Gary M. Rodkin—1,174; Stefan M. Selig—1,240; Daniel C. Smith, Ph.D.—1,191; J. Albert Smith, Jr.—1,305; Marta R. Stewart—1,191, and Brian J. McDade—1,553; and all directors and executive officers as a group—17,231. Includes shares acquired through the reinvestment of dividends on common shares held in the Director Deferred Compensation Plan.

(3)
As of December 31, 2018, the following restricted shares were held by the independent directors: Glyn F. Aeppel—2,818; Larry C. Glasscock—7,701; Karen N. Horn, Ph.D.—14,218; Allan Hubbard—8,561; Reuben S. Leibowitz—12,800; Gary M. Rodkin—3,501; Stefan M. Selig—1,726; Daniel C. Smith, Ph.D.—8,499; J. Albert Smith, Jr.—17,986; and Marta R. Stewart—1,427. These amounts do not include shares acquired from the reinvestment of dividends which are required to be reinvested in additional shares of common stock which also must be held in the Director Deferred Compensation Plan and do not include any other shares owned by the independent directors.

(4)
At March 15, 2019, there were 308,985,608 shares of common stock and 8,000 shares of Class B common stock outstanding. Upon the occurrence of certain events, shares of Class B common stock convert automatically into common shares (on a one-for-one basis). These percentages assume the exchange of units for common shares only by the applicable beneficial owner.

(5)
At March 15, 2019, the Operating Partnership had 355,776,206 units outstanding, of which we owned, directly or indirectly, 308,993,608 or 86.9%. These percentages assume that no units held by limited partners are exchanged for common shares. The number of units shown does not include any unvested LTIP units awarded under a long-term incentive performance program as described in the Compensation Discussion and Analysis section included in this Proxy Statement because the unvested LTIP units are subject to performance and/or time-based vesting requirements.

(6)
Includes common shares, shares of Class B common stock and units beneficially owned by the MSA group. See the Principal Shareholders Table on page 20.

(7)
Includes 2,500 shares of common stock held by Mr. Leibowitz's wife. Does not include 8,500 shares of common stock held by charitable foundations of which Mr. Leibowitz is an officer or trustee and 1,400 shares of common stock held by various trusts of which Mr. Leibowitz's wife is the trustee. Mr. Leibowitz disclaims beneficial ownership of these shares.

(8)
Includes common shares, shares of Class B common stock and units beneficially owned by the MSA group. See the Principal Shareholders Table on page 20.

(9)
Includes 383 shares of common stock held by Mr. Fivel's wife.

(10)
Includes 2,896 shares of common stock held in trusts for the benefit of Mr. Rulli's children.

(11)
Does not include 4,172,426 units beneficially owned by or for the benefit of Simon family members as to which members of the MSA group do not have voting or dispositive power.


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PROPOSAL 1:      Election of Directors

PRINCIPAL SHAREHOLDERS

The following table sets forth certain information concerning each person (including any group) known to us to beneficially own more than five percent (5%) of any class of our voting securities as of March 15, 2019. Unless otherwise indicated in the footnotes, shares are owned directly and the indicated person has sole voting and investment power.

 
SHARES (1)
NAME AND ADDRESS
NUMBER OF SHARES
%

The Vanguard Group (2)
100 Vanguard Boulevard
Malvern, PA 19355



40,278,315 13.04% 

BlackRock, Inc. (3)
55 East 52nd Street
New York, NY 10055


31,228,680

10.11% 

Melvin Simon & Associates, Inc., et al. (4)
225 West Washington Street
Indianapolis, IN 46204




28,110,424 (5)


8.38% (6)

Capital World Investors (7)
333 South Hope Street
Los Angeles, CA 90071


19,517,709

6.32% 

State Street Corporation and Subsidiaries (8)
State Street Financial Center
One Lincoln Street
Boston, MA 02111





18,148,090


5.87% 
(1)
Voting shares include shares of common stock and Class B common stock. Upon the occurrence of certain events, Class B common stock converts automatically into shares of our common stock (on a one-for-one basis). The amounts in the table also include shares of common stock that may be issued upon the exchange of units of limited partnership interest, or units, of the Operating Partnership, that are exchangeable either for shares of common stock (on a one-for-one basis) or for cash, as determined by the Company.

(2)
Based solely on information provided by The Vanguard Group and Vanguard Specialized Funds—Vanguard Real Estate Index Fund (f/k/a Vanguard REIT Index Fund) in two Schedule 13G/As filed with the SEC on February 11, 2019 and January 31, 2019, respectively. The Vanguard Group has the sole power to vote 652,585 shares of common stock and dispose of 39,512,725 shares of common stock and shared power to vote 396,084 shares of common stock and dispose of 765,590 shares of common stock. The Vanguard Real Estate Index Fund (f/k/a Vanguard REIT Index Fund) has sole power to vote 14,728,297 shares of common stock of the 40,278,315 shares of common stock included in the amount reported for The Vanguard Group.

(3)
Based solely on information provided by BlackRock, Inc. in a Schedule 13G/A filed with the SEC on February 6, 2019. BlackRock, Inc. has the sole power to vote 28,361,382 shares of common stock, and the sole power to dispose of 31,228,680 shares of common stock.

(4)
Based on information provided by the MSA Group, consisting of MSA, Mr. David Simon, Mr. Herbert Simon, two voting trusts and other entities and trusts controlled by or for the benefit of MSA, Mr. David Simon or Mr. Herbert Simon, as the case may be, including in a Schedule 13G/A filed with the SEC on February 14, 2019: MSA has sole power to vote and dispose of 11,634,169 shares of common stock and shared power to vote and dispose of 889,747 shares of common stock; Mr. Herbert Simon, a director, has sole power to vote and dispose of 5,426,429 shares of common stock and shared power to vote and dispose of 898,120 shares of common stock; Mr. David Simon, an executive officer and director has sole power to vote 10,032,936 shares of common stock, the sole power to dispose of 3,114,669 shares of common stock, shared power to vote 1,016,890 shares of common stock and shared power to dispose of 7,935,157 shares of common stock. A total of 890,120 shares of common stock included in the amount reported for the MSA Group and 8,000 shares of Class B common stock are subject to the two voting trusts as to which Mr. David Simon and Mr. Herbert Simon are the voting trustees. MSA is owned 30.94% by trusts for the benefit of Mr. Herbert Simon, 3.04% by a trust for the benefit of Mr. David Simon, and by certain other shareholders.

(5)
Includes 1,640,876 shares of common stock currently outstanding; 26,461,548 shares of common stock issuable upon exchange of units; and 8,000 shares of Class B common stock. Does not include 4,172,426 units that are held by or for the benefit of Simon family members as to which MSA, Mr. David Simon or Mr. Herbert Simon do not have voting or dispositive power.

(6)
Assumes the exchange of units by the subject holder only.

(7)
Based solely on information provided by Capital World Investors in a Schedule 13G/A filed with the SEC on February 14, 2019. Capital World Investors has sole power to vote and sole power to dispose of all of the shares of common stock indicated in the table above.

(8)
Based solely on information provided by State Street Corporation in a Schedule 13G/A filed with the SEC on February 13, 2019. State Street Corporation has shared power to vote 16,246,999 shares of common stock and shared power to dispose of 18,134,482 shares of common stock.


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PROPOSAL 2:       Advisory Vote to Approve the Compensation of our Named Executive Officers

Our executive compensation program is designed to facilitate long-term shareholder value creation. We believe our focus on pay-for-performance and on corporate governance creates alignment between the interests of our named executive officers ("NEOs") and the interests of the Company's shareholders.

We are asking for shareholder approval, on an advisory or non-binding basis, of the compensation of our NEOs, as disclosed in this Proxy Statement pursuant to Section 14A of the Exchange Act, commonly known as a "Say-on-Pay" vote. This vote is not intended to address any specific item of compensation, but rather the overall compensation of our NEOs and the compensation policies and practices described in this Proxy Statement. For additional information on our NEOs, please refer to the Company's 2018 10-K, Part III, Item 10—Directors, Executive Officers and Corporate Governance.

We will evaluate whether any actions are necessary to address significant concerns as a result of this advisory vote. We currently conduct annual advisory votes on executive compensation, and we expect to conduct the next advisory vote at our 2020 annual meeting of shareholders.

For the reasons discussed above and in this Proxy Statement under the headings "Compensation Discussion and Analysis" and "Executive Compensation Tables," the Board intends to introduce the following resolution at the 2019 Annual Meeting:

    "RESOLVED, that the compensation of the Named Executive Officers of the Company, as disclosed in this Proxy Statement under the headings "Compensation Discussion and Analysis" and "Executive Compensation Tables," including the compensation tables and their accompanying narrative discussion, is approved."

GRAPHICClick to enlarge   THE BOARD RECOMMENDS THAT SHAREHOLDERS VOTE " FOR " THE APPROVAL OF THE ADVISORY RESOLUTION RELATING TO THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS.


COMPENSATION COMMITTEE REPORT

The Committee reviewed and discussed with management the Compensation Discussion and Analysis section included in this Proxy Statement. Based on its review and these discussions with management, the Committee recommended to the Board that it be incorporated by reference into the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2018, and included in the Proxy Statement for the 2019 Annual Meeting of Shareholders.

All references to the "Committee" in this Report are to the Compensation Committee.

The Compensation Committee:
Reuben S. Leibowitz, Chairman
Allan Hubbard
Stefan M. Selig
Daniel C. Smith, Ph.D.
J. Albert Smith

March 27, 2019


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COMPENSATION DISCUSSION AND ANALYSIS

EXECUTIVE SUMMARY

The Committee believes that our overall executive compensation program continues to responsibly and effectively incentivize strong long-term performance from our NEOs and service our shareholders' interests. The Committee will continue to review the effectiveness of the Company's executive compensation program as well as continue to consider shareholder feedback in its ongoing review of our executive compensation program. The Simon Property Group, L.P. 1998 Stock Incentive Plan expired on December 31, 2018 (the "1998 Plan"). In March, 2019, upon the Committee's recommendation, the Board unanimously adopted the 2019 Plan, subject to the approval of our shareholders at our 2019 Annual Meeting (see Proposal 4 on page 44).

In 2018, we continued our track record of posting the strongest financial results in our industry. The following are some of the Company's achievements in 2018:

Reported funds from operations ("FFO") in 2018 was $12.13 per share. This was an 8.2% increase over the Company's reported FFO in 2017 which was $11.21 per share, and a 15.6% increase over the Company's FFO in 2016 which was $10.49 per share. See "Where do I find reconciliation of non-GAAP terms to GAAP terms?" in the section of this Proxy Statement titled "Frequently Asked Questions and Answers" on page 57.

As a result of the strong performance of our properties, comparable property net operating income ("NOI") grew 2.3% for our U.S. Malls, Premium Outlets and The Mills and total portfolio NOI increased 3.7%, or more than $230 million, in 2018. See "Where do I find reconciliation of non-GAAP terms to GAAP terms?" in the section of this Proxy Statement titled "Frequently Asked Questions and Answers" on page 57.
Our U.S. Malls and Premium Outlets once again delivered strong financial and operational results with year-end occupancy near historic highs at 95.9%.

We increased our dividend by 10% over 2017 to a total of $7.90 per common share.

The Company's strong operating performance in 2018, as described above, together with its performance in 2016 and 2017, led to the Company delivering a CAGR on FFO of 7.2% for the period from January 1, 2016 through December 31, 2018 as shown in the "Reported FFO per Share" graph below. In addition, the Company's 2018 FFO performance exceeded the level required to authorize Target funding of the Company's 2018 Annual Cash Incentive Compensation program. Notwithstanding the foregoing, the Committee, acting on the recommendation of the CEO, elected to fund a lower amount than the amount allocated for such a performance level under the 2018 Annual Cash Incentive program.

GRAPHICClick to enlarge

Notwithstanding the Company's strong performance in 2018, due to the rigorous performance requirements approved by the Committee at the time the 2016-2018 LTIP Program was established, no LTIP units were earned under our 2016-2018 LTIP Program, because the Company's absolute and relative total shareholder return ("TSR") against the MSCI REIT Index and S&P 500 Index did not reach the required threshold performance level.


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COMPENSATION DISCUSSION AND ANALYSIS

In February, 2018 the Committee established and granted awards under a redesigned LTIP Program (the "2018 LTIP Program"). The 2018 LTIP Program has two performance metrics; FFO and relative TSR. The new relative TSR metric uses the FTSE NAREIT Equity Retail Index as the comparator against which the Company's TSR is measured. The Committee currently believes it is the most appropriate index against which to measure the Company's performance, given the relevant

business profiles of the FTSE NAREIT Equity Retail Index constituents.

The Company's 2018 FFO performance is set forth in the table above and the Company's TSR against the FTSE NAREIT Equity Retail Index in 2018 appears in the table below, along with a comparison of the Company's TSR against the S&P 500.

GRAPHICClick to enlarge

OBJECTIVES OF OUR EXECUTIVE
COMPENSATION PROGRAM

Our executive compensation program is designed to accomplish the following objectives:

Retain a group of highly-experienced executives who have worked together as a team for a long period of time and who make major contributions to our success.

Attract other highly qualified executives to strengthen that team and facilitate succession planning.
Motivate executives to contribute to the achievement of corporate and business unit goals as well as individual goals.

Emphasize equity-based incentives with long-term performance measurement periods and vesting conditions.

Align interests of executives with shareholders by linking payouts to performance measures that are designed to promote the creation of long-term shareholder value.


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COMPENSATION DISCUSSION AND ANALYSIS

SHAREHOLDER/GOVERNANCE FRIENDLY ASPECTS OF OUR CURRENT EXECUTIVE COMPENSATION PROGRAM

    WHAT WE DO    
 
    GRAPHICClick to enlarge   Pay for Performance—Annual Cash Incentive Program. Heavy emphasis on performance-based compensation. Annual Cash Incentive Compensation is paid only if certain FFO targets are achieved.    
 
    GRAPHICClick to enlarge   Pay for Performance—LTIP Program. Our LTIP Program is 100% performance-based and is tied to rigorous relative stock price performance goals and achievement of a pre-established growth rate on an objective financial metric.    
 
    GRAPHICClick to enlarge   Post-Performance Time-Based Vesting on Earned LTIP Units. LTIP units are earned based on specific performance criteria. Once any units are earned under these programs, executives must remain with the Company for at least an additional one-year period to vest in the LTIP units; however, for certain earned LTIP units there is a two-year vesting period.    
 
    GRAPHICClick to enlarge   Robust Stock Ownership Guidelines. Stock ownership guidelines for our CEO and other NEOs are 6x and 3x base salary, respectively. In addition, the CEO and other NEOs must retain shares until he or she retires, dies, becomes disabled or is no longer our employee. All non-employee directors must hold common stock while they serve as directors.    
 
    GRAPHICClick to enlarge   Double Trigger Equity Acceleration Upon a Change in Control. All equity grants include double trigger equity acceleration provisions.    
 
    GRAPHICClick to enlarge   Clawback Policy. Applies in the event of any material restatement of the Company's financials beginning in 2012, whether or not fraud/misconduct is involved.    
 
    GRAPHICClick to enlarge   Independent Compensation Consultant. The Committee has utilized an independent compensation consulting firm, Semler Brossy, since the end of 2011.    
 
    GRAPHICClick to enlarge   Compensation Risk Assessments. Conducted annually to evaluate whether the executive compensation program encourages excessively risky behaviors.    
 
    WHAT WE DON'T DO    
 
    GRAPHICClick to enlarge   No Annual Grants of Time-Vested Restricted Stock or Options to our NEOs . We do not grant awards that are earned solely based on time of service to our NEOs.    
 
    GRAPHICClick to enlarge   No Excessive Perquisites. No supplemental executive retirement plans, company cars, club memberships or other significant perquisites.    
 
    GRAPHICClick to enlarge   No Gross-Ups. We have never had any arrangements requiring us to gross-up compensation to cover taxes owed by the executives, including excise taxes payable by the executive in connection with a change in control.    
 
    GRAPHICClick to enlarge   No Excessive Retirement and Health Benefits. The Company has never had a traditional defined benefit plan.    
 
    GRAPHICClick to enlarge   No Hedging or Pledging of Company Stock. Our NEOs and directors are prohibited from engaging in any hedging or pledging of Company stock.    
 

2018 SAY-ON-PAY VOTE

At our 2018 annual meeting of shareholders the percentage of shares voting that approved our advisory "Say-on-Pay" vote was approximately 96%. The Committee believes that this support level demonstrates a strong alignment among our shareholders, the Company's performance, and our executive compensation program. Accordingly, the Committee did not make any changes to the Company's executive compensation program in direct response to the 2018 "Say-on-Pay" vote.


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COMPENSATION DISCUSSION AND ANALYSIS

EXECUTIVE COMPENSATION APPROACH AND PROCESS

ALIGNMENT OF PAY WITH PERFORMANCE

The Committee designs our executive compensation program to provide pay outcomes which are aligned with, and responsive to our operating, financial and market performance in both good and challenging times. Further, we generally believe that a significant majority of the compensation of our CEO and other NEOs should be performance-based in the form of variable pay (annual and long-term incentives) to emphasize our commitment to rewarding excellent performance and

penalizing poor performance. We believe our compensation decisions in the past have been consistent with this belief. Looking back over the last five years, the average percentage of our CEO's compensation that was performance-based, was 89.3% and the average percentage of our other NEOs' compensation that was performance-based, in the form of variable pay, was 82.7%. Our compensation decisions in 2018 were consistent with this approach. The percentage of compensation that was performance-based in 2018 for our CEO and other NEOs, was 89.0% and 81.2%, respectively.

GRAPHICClick to enlarge


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COMPENSATION DISCUSSION AND ANALYSIS

WHAT WE PAY AND WHY: PRINCIPAL ELEMENTS OF COMPENSATION

To accomplish our compensation objectives, we designed our executive compensation program with three major elements—Base Salary, Annual Cash Incentive Compensation, and Performance-Based Long-Term Incentives.

 
   
   
  OBJECTIVES
   
  KEY FEATURES
   
    Base Salary    

Provide an appropriate level of fixed compensation that will promote executive recruitment and retention.

   

Fixed compensation.

 
    Annual Cash Incentive Compensation      

Reward achievement of our annual financial and operating goals based on the Committee's quantitative and qualitative assessment of the executive's contributions to that performance.

     

Variable, short-term cash compensation.

Funded upon achievement of threshold FFO level.

Allocated based on objective and subjective evaluation of Company, business unit, and individual performance.
 

   
    2018 Performance-Based Long-Term Incentives    

Promote the creation of long-term shareholder value.

Align the interests of our executives with the interests of our shareholders.

Promote the retention of our executives through a vesting requirement after any are earned.

   

Variable, performance-based long-term equity compensation.

Performance Metrics:

o

Funds From Operations (FFO) (weighted 60%).

o

TSR vs FTSE NAREIT Equity Retail Index (weighted 40%).

Award is composed of a tranche with a three-year performance period and a tranche with a two-year performance period to provide for an equity earning opportunity each year because no grants were made in 2017.

The amount earned on an award will be determined on December 31, 2020.

Tranche with a three-year performance period has an additional one year of vesting and tranche with a two-year performance period has an additional two years of vesting.

Any amounts earned will vest no later than January 1, 2022.

Maximum amount that may be earned is 150% of the Target award.

Rigorous minimum thresholds to receive any payout.

 

 

ROLE OF THE INDEPENDENT COMPENSATION CONSULTANT

The Committee has retained Semler Brossy as its independent consultant since 2011. The Consultant reports directly to the Committee and performs no other work for the Company unless directed by the Committee. The Committee has analyzed whether the work of Semler Brossy as a compensation consultant has raised any conflict of interest, taking into consideration the following factors:

i.
The provision of other services to the Company by Semler Brossy;

ii.
The amount of fees from the Company paid to Semler Brossy as a percentage of the firm's total revenue;

iii.
Semler Brossy's policies and procedures that are designed to prevent conflicts of interest;

iv.
Any business or personal relationship of Semler Brossy or the individual compensation advisors employed by the firm with an executive officer of the Company;

v.
Any business or personal relationship of the individual compensation advisors with any member of the Committee; and

vi.
Any stock of the Company owned by Semler Brossy or the individual compensation advisors employed by the firm.

The Committee has determined, based on its analysis of the above factors, that the work of Semler Brossy and the individual compensation advisors employed by Semler Brossy as compensation consultants to the Company has not created any conflict of interest.

ROLE OF MANAGEMENT IN COMPENSATION DECISIONS

Our CEO provides recommendations to the Committee on the compensation of each of the other NEOs. The CEO develops recommendations using peer group data, assessments of individual performance and achievement of the Company's strategic and tactical plans, the state of the business environment, and input from our human resources department on various factors (e.g., compensation history, tenure, responsibilities, market data for competitive positions and retention concerns). The Committee considers our CEO's recommendations together with the input of our independent compensation consultant; however, all final compensation decisions affecting NEOs' pay are made by the Committee itself. Additionally, all aspects of the CEO's compensation and resulting compensation decisions are determined by the Committee.


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COMPENSATION DISCUSSION AND ANALYSIS

COMPANY PEER GROUP AND COMPENSATION ASSESSMENT

The Committee uses an industry peer group as a source of data for assessing and determining pay levels for our NEOs. The peer group is reviewed annually, and recalibrated when appropriate, by the Committee's independent compensation consultant. Developing a relevant peer group is challenging because there are no Retail REITs of comparable size, complexity and breadth. Non-Retail REITs are not always directly comparable to us because of the different underlying business fundamentals. Therefore, the Committee does not formulaically derive target pay opportunities or actual pay levels from these other companies; rather, this peer group is intended to provide the Committee with insight into overall market pay levels, market trends, commonly viewed "best" governance practices, and overall industry performance. The Committee also evaluated the appropriateness of this peer group by considering the methodology used by Institutional Shareholder Services, or "ISS."

The 2018 peer group is comprised of the 16 largest companies in the real estate industry by market capitalization, with some restrictions to maintain a balanced mix. Specifically, the group includes:

The six largest (by market capitalization) Retail REIT companies;

The six largest (by market capitalization) Non-Retail REIT companies (excluding all Retail REIT companies); and

The four largest companies from the broader real estate industry.

The 2018 peer group reflects changes in the market capitalization of certain participants in the real estate industry. Changes from the 2017 peer group include the removal of two companies (Equity Residential and Brixmor Property Group, Inc.) and the addition of two companies (Equinix, Inc. and Regency Centers Corporation), in each case, due to the size consideration noted above.

2018 PEER GROUP
(In $MMs)

 
PEER COMPANY (1)
MARKET
CAPITALIZATION
(12/31/18)

ASSETS
(12/31/18)

COMPANY TYPE
 

 

American Tower Corp. (NYSE:AMT)

$ 69,681 $ 33,010 Specialized REIT

 

Crown Castle International Corp. (NYSE:CCI)

$ 45,065 $ 32,785 Specialized REIT  

 

Prologis, Inc. (NYSE:PLD)

$ 38,083 $ 38,418 Industrial REIT

 

Public Storage (NYSE:PSA)

$ 35,293 $ 10,928 Specialized REIT  

 

Equinix, Inc. (NasdaqGS:EQIX)

$ 28,342 $ 20,245 Specialized REIT

 

Welltower, Inc. (NYSE:WELL)

$ 26,631 $ 30,342 Health Care REIT  

 

Realty Income Corporation (NYSE:O)

$ 18,604 $ 15,260 Retail REIT

 

CBRE Group, Inc. (NYSE:CBRE)

$ 13,296 $ 13,457 Real Estate Services  

 

Regency Centers Corporation (NasdaqGS:REG)

$ 9,943 $ 10,945 Retail REIT

 

Federal Realty Investment Trust (NYSE:FRT)

$ 8,719 $ 6,290 Retail REIT  

 

Macerich Company (NYSE:MAC)

$ 6,568 $ 9,027 Retail REIT

 

Kimco Realty Corp. (NYSE:KIM)

$ 6,173 $ 10,999 Retail REIT  

 

Jones Lang LaSalle, Inc. (NYSE:JLL)

$ 5,769 $ 10,026 Real Estate Services

 

The Howard Hughes Corp. (NYSE:HHC)

$ 4,201 $ 7,356 Real Estate Development  

 

Realogy Holdings Corp. (NYSE:RLGY)

$ 1,735 $ 7,290 Real Estate Services

 

GGP, Inc.

Retail REIT  

 

Simon Property Group

$ 59,855 $ 30,686 Retail REIT
(1)
Although GGP Inc. was part of the 2018 peer group, market capitalization and asset base information is not provided as of December 31, 2018, due to it having been acquired by Brookfield Property Partners L.P. on August 28, 2018, and therefore not having any publicly available information on its market capitalization or asset base as of December 31, 2018.


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COMPENSATION DISCUSSION AND ANALYSIS

COMPENSATION IN 2018

The Committee's meetings in 2018 were designed, among other things, to facilitate and encourage free and frank discussions among Committee members, executive management, the Committee's compensation consultant and other Company personnel involved in executive compensation matters. The Committee made decisions impacting the type and amount of compensation paid to our NEOs as reported in the 2018 Summary Compensation Table. These decisions related to: Base Salaries, Annual Cash Incentive Compensation for 2018 performance, and Performance-Based Long-Term Incentive opportunities in the form of performance-based LTIP unit awards for our NEOs.

2018 BASE SALARIES

The Committee periodically reviews base salaries for the NEOs and makes adjustments to reflect market conditions, changes in responsibilities, and merit increases. During 2018, we maintained Mr. David Simon's base salary at the same level it has been since 2011. The Committee increased certain of our NEOs' base salaries to reflect promotions and expanded responsibilities. Specifically, in 2018 the Committee increased Mr. Fivel's salary in recognition of his successful transition from Assistant General Counsel to General Counsel in 2017 and increased Mr. Rulli's salary in recognition of his contribution to the Company's successful implementation of the Workday HR management tool and the expansion of the Company's Operational Intelligence Center.

2018 ANNUAL CASH INCENTIVE COMPENSATION

The Committee rewards executive officers with Annual Cash Incentive Compensation for achieving the Company's financial and operating plan taking into account an assessment of each NEO's contributions to those achievements. Payouts under our Annual Cash Incentive Compensation program are the result of both the Company and the individuals reaching established

performance targets. The Committee follows a two-step process to determine what amounts will be paid under the Annual Cash Incentive Compensation program each year:

1.
The Company must deliver certain FFO performance during the year before any payments may be made under the program. If threshold performance is not achieved, no payments are made. For 2018, the Company generated FFO of $12.13 per share. Because this amount exceeded the threshold FFO performance of $11.79 per share, the Committee moved to step two in this process. See "Where do I find reconciliation of non-GAAP terms to GAAP terms?" in the section of the Proxy Statement titled "Frequently Asked Questions and Answers" on page 57.

2.
Each individual's performance is assessed by the CEO and the Committee against defined goals and objectives which are established at the beginning of each year. The assessment delivers a total score for each individual. Each individual's total score then determines the portion of that NEO's target Annual Cash Incentive Compensation that has been earned.


2018 GOALS AND PERFORMANCE

    A summary of the NEOs' 2018 goals and performance along with their 2018 Annual Cash Incentive Compensation payments may be found in the table below. The Committee determined that 2018 FFO performance exceeded the level required to authorize Target funding of the Company's 2018 Annual Cash Incentive Compensation program. Notwithstanding this, the Committee, acting on the recommendation of the CEO, elected to fund a lower amount than the amount allocated for such a performance level under the
2018 Annual Cash Incentive program.
   
 
    NAMED EXECUTIVE
OFFICER
  2018 KEY INDIVIDUAL GOALS AND PERFORMANCE       2018
ANNUAL CASH
INCENTIVE
COMPENSATION
AWARD
          2017
ANNUAL CASH
INCENTIVE
COMPENSATION
AWARD
       
    David Simon  

FFO increased 8.2% from 2017 to 2018

    $3,850,000         $3,500,000        
     

Dividend growth exceeded 10% from 2017 to 2018

                     
    Richard S. Sokolov  

Comparable Net Operating Income grew 2.3% in 2018

      $1,500,000           $1,500,000        
       

Leasing Spreads increased by 14.3%

                           
    Steven E. Fivel  

Company maintained an A- ranking for CDP sustainability

    $900,000         $750,000        
     

Several legal disputes were brought to a successful conclusion

                     
    John Rulli  

Material increase in the number of successful leases to local tenants

      $900,000           $750,000        
       

Achieved occupancy level of 95.9%

                           
    Andrew A. Juster  

Successful amendment and extension of $3.5 billion credit facility to 2022

    $700,000         $700,000        
     

Successful completion of property specific refinancings

                     
    Brian J. McDade  

Successful amendment and extension of $3.5 billion credit facility to 2022

      $425,000           $350,000        
       

Increased size of commercial paper program to $2 billion

                           
                                     


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COMPENSATION DISCUSSION AND ANALYSIS

We pay Annual Cash Incentive Compensation to NEOs in the first calendar quarter of the following year so the Committee has sufficient time to assess our financial performance and the executives' contributions for the preceding year.

Pursuant to Mr. David Simon's employment agreement, his target Annual Cash Incentive Compensation is 200% of his base salary. However, the Committee determines his actual Annual Cash Incentive Compensation, which may be more or less than target, based on his and the Company's performance.

PERFORMANCE-BASED LTIP AWARDS

For our executive compensation plans to be effective, it is necessary for NEO compensation to be competitive with other real estate companies and also with other large public and private enterprises with which the Company competes for executive talent. In order to achieve this, the Committee must take into account whether long-term incentives are reasonably obtainable or else face challenges retaining the Company's NEOs. Based on all of the foregoing, as well as current business conditions, working together with Semler Brossy, the Committee established a redesigned LTIP Program in the first quarter of 2018.

The Committee believes that as the responsibilities of our executives increase, the proportion of their total compensation that is at risk and dependent on performance should also increase. From 2010-2016, the Committee awarded performance-based LTIP units to the NEOs and certain other executives to achieve this objective. After suspending the award of LTIP units to NEOs in 2017, the Committee reintroduced such awards in 2018.

LTIP units are a type of limited partnership interest issued by the Operating Partnership. Under the performance-based LTIP Program, LTIP awards can be earned in whole or in part, depending on the extent to which the performance targets set by the Committee for the relevant performance period are met. The Committee believes the performance-based LTIP Program design reflects the Company's pay-for-performance philosophy and high expectations:

Performance requirements are designed to be rigorous and to promote long-term creation of shareholder value. The challenging nature of these performance requirements can be seen based on no LTIP units having been earned under either the 2015-2017 LTIP Program or the 2016-2018 LTIP Program.

The 2018 LTIP Program has both a financial metric and a relative TSR metric. It is distinct from the 2015-2017 LTIP Program and the 2016-2018 LTIP Program which only had a TSR performance metric and had both relative and absolute TSR components. A 2018 LTIP Program award is earned

    based on the FFO growth rate (weighted 60%) and the Company's TSR against the FTSE NAREIT Equity Retail Index (weighted 40%), in each case, during the performance periods described below. The performance goals were designed to be challenging but achievable with strong management performance. For example, under the 2018 LTIP Program, performance that does not achieve the rate of return of the FTSE NAREIT Equity Retail Index will not result in any LTIP units being earned based on relative TSR. The 2018 LTIP Program is composed of two tranches; one with a three-year performance period followed by a one year vesting period; and one with a two-year performance period followed by a two year vesting period. This structure was established to provide an equity earning opportunity each year because no LTIP grants were made in 2017.

The Committee is responsible for setting performance targets each year awards are made under the LTIP Program, and we expect to continue to establish challenging targets that will include a requirement for strong long-term financial and operational performance.

LTIP units are designed to qualify as "profits interests" in the Operating Partnership for federal income tax purposes. During the performance period, holders of LTIP units will be allocated taxable profits and losses equal to one-tenth of the amounts allocated to an Operating Partnership unit and will receive distributions equal to one-tenth of the amount of regular quarterly distributions paid on an Operating Partnership unit, and certain special distributions. As a general matter, the profits interest characteristics of the LTIP units mean that they will not be economically equivalent in value at the time of award to the economic value of an Operating Partnership unit. The value of the LTIP units can increase over time until the value of the LTIP units is equivalent to the value of the Operating Partnership units on a one-for-one basis.

After the end of the performance period, to the extent that the required performance has been achieved, holders of earned LTIP units, both vested and unvested, will be entitled to receive distributions in an amount per LTIP unit equal to the distributions, both regular and special, payable on a unit. Vested LTIP units are exchangeable for shares of the Company's common stock on a one-for-one basis, or cash as selected by the Company.

The number of performance-based LTIP units earned is determined by the Committee at the end of the performance period using the pre-established payout matrices (with linear interpolation between the specified payout percentages).


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COMPENSATION DISCUSSION AND ANALYSIS

    2016-2018 LTIP PAYOUT MATRICES    

 

 

 

 

 

 

RELATIVE TSR

 

 
 
    ABSOLUTE TSR
WEIGHT 20%
  VS. MSCI REIT INDEX
WEIGHT 60%
  VS. S&P 500 INDEX
WEIGHT 20%
   
    PERFORMANCE   PAYOUT % OF TARGET   PERFORMANCE   PAYOUT % OF TARGET   PERFORMANCE   PAYOUT % OF TARGET    
    £ 20%   0.0%   Index –1%   0.0%   Index –2%   0.0%  
    24%   33.3%   Index   33.3%   Index   33.3%    
    27%   50.0%   Index + 1%   50.0%   Index + 2%   100.0%  
    30%   66.7%   Index + 2%   66.7%            
    33%   83.3%   Index + 3%   100.0%      
    ³ 36%   100.0%                    

 

 

 

2016-2018 LTIP PROGRAM ACTUAL PERFORMANCE RESULTS

   

 

 

In February 2019, the Committee reviewed calculations that had been prepared by management and determined that the Company's performance during the three-year performance period ending December 31, 2018, did not satisfy any of the performance criteria for the 2016-2018 LTIP Program, as reflected in the table below.

   

 

 

COMPONENT

    WEIGHTING   PERFORMANCE REQUIRED TO
EARN MINIMUM
  ACTUAL
PERFORMANCE
    % EARNED    

 

 

Absolute TSR

  20%   > 20%   2.59%   0.0%  

 

 

Relative TSR vs. MSCI U.S. REIT Index (RMS)

    60%   > Index –1%   11.23% below the Index     0.0%    

 

 

Relative TSR vs. S&P 500 Index

  20%   > Index –2%   31.37% below the Index   0.0%  

 

OTHER ELEMENTS OF COMPENSATION

Retirement and Health and Welfare Benefits.  We have never had a traditional defined benefit pension plan. We maintain a 401(k) retirement plan in which all salaried employees can participate on the same terms. During 2018, our basic contribution to the 401(k) retirement plan was equal to 1.0% of the participant's base salary and Annual Cash Incentive Compensation which vests 20% after the completion of two years and an additional 20% after each additional year of service until fully vested after six years. We match 100% of the first 3% of the participant's contribution and 50% of the next 2% of the participant's contribution. Our matching contributions are vested when made. Our basic and matching contributions are subject to applicable IRS limits and regulations. The limit for Company contributions for any participant in 2018 was $13,750. The contributions we made to the 401(k) accounts of the NEOs are shown in the "All Other Compensation" column of the 2018 Summary Compensation Table on page 32. NEOs also participate in health and welfare benefit plans on the same terms as other salaried employees.

No Gross-Up for Excess Parachute Payments.  Mr. David Simon has an employment agreement. No other NEOs currently have employment agreements. There are no arrangements requiring us to gross-up compensation to cover taxes owed by the NEOs, including excise taxes payable by the NEOs in connection with a change in control.

If Mr. David Simon would become subject to the excise tax on certain "excess parachute payments" pursuant to Section 4999

of the Internal Revenue Code, his employment agreement provides that payments which would be subject to the excise tax will be reduced if he retains a greater after-tax amount after such reduction; otherwise, no reduction will be made. His employment agreement does not contain a gross-up for this excise tax.

Deferred Compensation Plan.  We maintain a nonqualified deferred compensation plan that has permitted senior executives, key employees and non-employee directors to defer all or part of their compensation, including awards under the 1998 Plan and, subject to approval by our shareholders at the 2019 Annual Meeting, under the 2019 Plan. There is an account for the executives and employees and a separate account for the non-employee directors. Although we have the discretion to contribute a matching amount or make additional incentive contributions, we have never done either. As a result, the amounts disclosed in the "Nonqualified Deferred Compensation In 2018" table on page 35 consist entirely of compensation earned by, but not yet paid to, the NEOs and any earnings on such deferred compensation. A participant's deferrals are fully vested, except for restricted stock awards that still have vesting requirements. Upon death or disability of the participant, our insolvency, or a change in control affecting us, a participant becomes 100% vested in his account.

No Stock Option Grants.  The Committee has not granted any stock options to executives or other employees since 2001.


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COMPENSATION DISCUSSION AND ANALYSIS

OTHER POLICIES

EQUITY AWARD GRANT PRACTICES

In the ordinary course of our compensation cycle for our NEOs we make LTIP awards in the first calendar quarter after financial results for the preceding year have been released.

EXECUTIVE EQUITY OWNERSHIP GUIDELINES

We believe the financial interests of our executives should be aligned with the long-term interests of our shareholders. We also believe that requiring our executives to own a significant number of shares of our common stock, combined with our rigorous stock retention policy, serves as a strong motivator for our executives to be prudent in their operation of the Company. Therefore, in addition to long-term incentives, our Board has established equity ownership guidelines for key executives, including the NEOs.

The current ownership guidelines require the executives to maintain ownership of our stock or any class of our equity securities or units of the Operating Partnership having a value expressed as a multiple of their base salary for as long as they remain our employees. Our current guidelines for the CEO and other executive officers are set forth below.

POSITION
  VALUE AS A MULTIPLE OF BASE SALARY
 

Chief Executive Officer

  6.0x  

Executive Officers

    3.0x  

Certain Executive Vice Presidents

  3.0x  

In addition, these executives are required to retain ownership of a sufficient number of shares received in the form of restricted stock awards representing at least 50% of the after-tax value of their awards or 25% of the pre-tax value of such awards. These shares are to be retained by the executive until he or she retires, dies, becomes disabled, or is no longer our employee.

Ownership of any class of our equity securities or units of the Operating Partnership counts toward fulfillment of these guidelines, including securities held directly, securities held indirectly by or for the benefit of immediate family members, shares of restricted stock that have been earned, even if not vested, and shares held following the exercise of stock options. Unexercised stock options do not count toward these goals. Each of our NEOs currently meets or exceeds these guidelines.

CLAWBACKS OF INCENTIVE COMPENSATION

Our annual and long-term incentive plans contain a clawback provision that applies to all of our current and former NEOs in the event of any material restatement of the Company's financial statements whether or not fraud or misconduct is involved. The clawback policy applies to cash amounts received through annual or long-term incentive plans, where payouts were based upon the financial results that were restated.

In addition, Mr. David Simon's employment agreement and the post-2010 LTIP Program award agreements for all NEOs,

including our CEO, provide that in the event of a financial restatement, the Company may recoup the employee's Annual Cash Incentive Compensation and other equity and non-equity compensation tied to the achievement of earnings targets if the compensation would not have been earned as a result of the financial restatement. These provisions will be superseded by any broader recoupment policy that the Company adopts pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act. Awards under the 2019 Plan are expected to include provisions expressly acknowledging the applicability of any such recoupment policy to the award.

HEDGING POLICY AND PLEDGING RESTRICTIONS

Our insider trading policy prohibits employees and directors from hedging the ownership of Company securities. In addition, we do not permit our executive officers to pledge shares.

COMPENSATION DECISIONS FOR 2019

In February 2019, the Committee met to make decisions related to our NEOs' base salaries and long-term incentive opportunities and approve the funding goals for 2019 under our Annual Cash Incentive Compensation program.

2019 BASE SALARIES

In 2019, Mr. David Simon did not receive an increase in his base salary; however, we gave certain of our NEOs increases in base salary to reflect promotions and expanded responsibilities.

2019 ANNUAL CASH INCENTIVE COMPENSATION PROGRAM

The 2019 Annual Cash Incentive Compensation program approved by the Committee is substantially similar to the 2018 Annual Cash Incentive Compensation program described on page 28.

The 2019 Annual Cash Incentive Compensation program FFO goals were approved early in 2019 and will be disclosed in our 2020 Proxy Statement.

2019 LTIP PROGRAM

In the first quarter of 2019, the Committee established and made awards under a modified LTIP Program (the "2019 LTIP Program"), subject to approval of the 2019 Plan by our shareholders at the 2019 Annual Meeting. The 2019 LTIP Program has a three-year performance period and is subject to an additional one-year vesting period. The Committee believes that the 2019 LTIP Program is structured to, and is designed to, drive strong performance from our NEOs through the use of rigorous performance metrics. The 2019 LTIP Program has an FFO component and a relative TSR component using the FTSE NAREIT Equity Retail Index as the comparator against which the Company's absolute TSR is compared. The Committee has also included a component that measures performance based on the achievement of strategic objective performance criteria.


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Table of Contents


EXECUTIVE COMPENSATION TABLES

SUMMARY COMPENSATION TABLE

NAME
(A)

  YEAR
(B)

  SALARY
(C)

  BONUS (1)
(D)

  STOCK
AWARDS (2)
(E)

  ALL OTHER
COMPENSATION (3)
(F)

  TOTAL
(G)

David Simon

  2018   $1,250,000   $3,850,000   $6,321,027   $15,891   $11,436,918

Chairman, CEO and President

  2017   $1,250,000   $3,500,000   $0   $15,657   $4,765,657

  2016   $1,250,000   $2,500,000   $9,472,676   $15,398   $13,238,074

Richard S. Sokolov

  2018   $800,000   $1,500,000   $2,328,799   $347,321   $4,976,120

Vice Chairman

  2017   $800,000   $1,500,000   $0   $338,494   $2,638,494

  2016   $800,000   $1,125,000   $2,991,372   $258,191   $5,174,563

Steven E. Fivel

  2018   $538,462   $900,000   $1,996,114   $14,701   $3,449,277

General Counsel and Secretary

  2017   $475,000   $750,000   $0   $14,514   $1,239,514

  2016          

John Rulli

  2018   $536,692   $900,000   $1,996,114   $16,640   $3,449,446

President of Malls—Chief Administrative Officer

  2017   $463,500   $750,000   $0   $16,404   $1,229,904

  2016   $463,500   $450,000   $2,243,529   $16,146   $3,173,175

Andrew A. Juster (4)

  2018   $500,000   $700,000   $0   $127,636   $1,327,636

Former Executive Vice President, Chief Financial Officer

  2017   $500,000   $700,000   $0   $16,801   $1,216,801

  2016   $500,000   $585,000   $2,492,809   $16,542   $3,594,351

Brian J. McDade (5)

  2018   $367,692   $425,000   $1,065,371 (6) $27,471   $1,885,534

Executive Vice President, Chief Financial Officer and Treasurer

  2017          

  2016          
(1)
Bonuses earned with respect to the indicated year were paid in the following year under our Annual Cash Incentive Compensation program. See the "2018 Annual Cash Incentive Compensation" section in the Compensation Discussion and Analysis for information about how we determined the payments for 2018.

(2)
Represents the total grant date fair value of all equity-based awards made during 2018 and 2016 determined in accordance with ASC 718. For 2018, represents the grant date fair value of the awards under the 2018 LTIP Program assuming the Company satisfies the Target performance levels established even though half of those LTIP units remain subject to a two-year performance period with a further two-year vesting requirement and half of those LTIP units remain subject to a three-year performance period with a further one-year vesting requirement. There were no LTIP awards made during 2017.

As explained in the Compensation Discussion and Analysis section included in this Proxy Statement, the Committee determined that our performance for the three-year period ended December 31, 2018, resulted in no payout of the 2016-2018 LTIP Program.

We engaged Deloitte, who is not our independent registered public accounting firm, to develop the grant date fair value of the TSR portion of the 2018 LTIP Program using a Monte Carlo simulation. A simulation was conducted using assumptions regarding the total stock return on the Company's common stock and the relative total return of the FTSE NAREIT Equity Retail Index, as well as expected volatility, risk-free investment rates, correlation coefficients, dividend reinvestment, and other factors. The grant date fair value of the FFO portion was calculated by multiplying $153.51, the closing price of our common stock as reports by the NYSE for February 28, 2018, by the number of LTIP units assuming the Company satisfies the Target performance levels established. The grant date fair values of the awards in the 2018 LTIP Program, as of February 28, 2018, were as follows (net of the purchase price of $0.25 per unit paid by the participant):

NAME
  NUMBER OF TARGET AWARD
UNITS FOR 2018 LTIP PROGRAM

  GRANT DATE TARGET FAIR VALUE
OF 2018 LTIP PROGRAM

David Simon

  49,227   $6,321,027

Richard S. Sokolov

 
18,136
 
$2,328,799