At Simon Property, a Change in Carrots Without a Stick SHAREHOLDERS get little say on executive pay. Yes, they can get angry. But they can rarely get even. One big investor, the Louisiana Municipal Police Employees" Retirement System, wants to change that. Its target is the Simon Property Group of Indianapolis. Last year, that company granted its chief executive, David Simon, a stock award worth $120 million. The folks down in Baton Rouge aren't very happy about that. The Louisiana pension fund argues that Mr. Simon's award should have been put to a shareholder vote, and it has sued Simon Property's board. The suit raises questions not only about Simon Property but also about the New York Stock Exchange, where Simon's shares are traded. The Big Board has rules that are supposed to protect shareholders from questionable pay practices. Now, many companies give their executives what are known as incentive awards, which are supposed to provide some, you know, incentive. This type of pay is usually tied to some measure of the company's performance. Hit the targets, and you get paid. Miss them, and you don't. But at Simon Property, an owner and operator of shopping malls, the only requirement to receive this bounty was that Mr. Simon show up for work. The legal fracas began in early 2011, when Simon's board was devising a new employment agreement for Mr. Simon. A particularly generous aspect of the contract was a one-million-share "retention award" under a stock incentive plan created by the company and approved by its shareholders in 1998. At the time, the grant was worth $120 million. Since then, Simon Property's share price has risen, so the award is now worth $146 million. Mr. Simon's award was to be paid in three installments, beginning on the sixth anniversary of the grant. But, unlike previous grants under the 1998 plan, the terms did not require Simon Property's performance to meet any benchmarks. The Louisiana fund argues that the switch is so significant that it should have been put to a shareholder vote before the award was made. Simon Property advised shareholders of the award, but only in July 2011, after the fact. In a securities filing, the company said its board had determined that the deal was in the company's best interests. The goal was to give Mr. Simon an incentive "to remain with the company for the full eight years of his employment agreement," the filing said. THE million-share grant rocketed Mr. Simon to the No. 2 spot among the highest-paid chief executives in the 2011 compensation derby. So it is perhaps not surprising that some Simon Property shareholders became angry. At the company's annual meeting last May, some 73 percent of shareholders voting on the company's pay practices opposed them. But it was too late to stop the award, and, besides, the vote was not binding. The Louisiana fund's lawsuit was filed a few months later. Hugh Burns, a spokesman for Simon Property, called the suit meritless. "Mr. Simon has a long track record of delivering truly superior shareholder returns," Mr. Burns said in a statement. Over 90 percent of David Simon's annual target compensation will continue to be at-risk and will be earned only if rigorous performance conditions are met. To be sure, companies do not typically ask for shareholder approval on employment contracts. Still, Simon Property's 1998 incentive plan states that the board can amend it without shareholder approval only if such a vote is not required "by law, regulation or listing requirement." This language gave lawyers for the Louisiana retirement system an opening. They argued that granting Mr. Simon one million shares of stock free of any performance measures represented a material change to the 1998 plan. And New York Stock Exchange rules require that shareholders vote on pay plans that undergo material changes. What kinds of plan changes does the N.Y.S.E. consider material? Its Web site provides guidance. A change that would significantly dilute existing shareholders" stakes is one example; another is a shift that results in an "expansion of the types of awards available under the plan." Because the awards available under Simon Property's 1998 plan consisted only of those based on performance, lawyers for the Louisiana system contend that eliminating benchmarks from Mr. Simon's award increased the types of awards available under the plan. That seems a sensible argument. But not, of course, to the Simon Property Group. And neither, it turns out, to the regulators at the N.Y.S.E.