The Macerich Company (MAC) DEFA14A Additional proxy soliciting materials

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

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The Macerich Company

Supplemental Information Regarding 2019 Proxy Statement

May 28, 2019

2

Annual Meeting of Stockholders to be Held on June 7, 2019

We ask for your support by voting in accordance with the recommendations of our Board of Directors on all

of the proposals included in our 2019 Proxy Statement, which was filed on April 26, 2019.  In particular, we

are requesting your vote FOR

Proposal 3, the approval of the annual advisory vote on the compensation

paid to our named executive officers (“NEOs”).

We take a very disciplined, “pay-for-performance” approach to executive compensation.  We believe that our

executive compensation program strongly aligns the compensation of our NEOs with our performance, as

detailed in the section of our 2019 Proxy Statement entitled “Compensation Discussion and Analysis.”

Glass Lewis has recommended a FOR

vote for Proposal 3.  However, ISS recommended an AGAINST

vote

on Proposal 3.  Notwithstanding the ISS recommendation, the Company believes that the executive

compensation program supports our financial and strategic objectives and is appropriately aligned with the

interests of our stockholders. ISS’ negative recommendation was unexpected because, among other

reasons, in connection with CEO succession in 2018 the target total direct compensation of our CEO, CFO

and next three highest paid executive officers for 2019 decreased 47% from that of the same group in 2018.

We strongly disagree with ISS’ recommendation on Proposal 3, as well as the stated reasons behind it. 

This presentation is intended to facilitate discussions with stockholders as part of our engagement with them

in advance of our Annual Meeting and sets forth the reasons for Macerich’s

substantive disagreement with

ISS.

We were pleased to receive the support of approximately 89% of the votes cast on our say-on-pay proposal

the prior two years, and over 97% in 2016.  We look forward to receiving strong support again this year.

3

CEO Compensation in Context: New CEO Target Total Direct Compensation

ISS Analysis Ignores New CEO Compensation

The ISS analysis focuses on the target total direct compensation (“TDC”) of Mr. A. Coppola, our former

CEO, in all evaluation components without an analysis of the 2019 target TDC for Mr. O’Hern, our new

CEO. The 2019 target TDC for Mr. O’Hern is 53% of his predecessor’s 2018 target TDC. In addition, with

other executive transitions, the Company’s overall 2019 target TDC for our NEOs is significantly reduced,

with the aggregate 2019 target TDC of our CEO, CFO and the next three highest paid executives

approximately 63% of the 2018 target TDC for our CEO, CFO and three highest paid executives.

CEO TARGET TOTAL DIRECT COMPENSATION COMPARISON

Former CEO-

Mr.

A.

Coppola’s

2018

Target Total Direct

Compensation

New CEO-

Mr. O’Hern’s

2019

Target Total Direct

Compensation

Mr.

O’Hern

(2019)

% +/-

Mr.

A.

Coppola

(2018)

$

1,000,000

$

800,000

-20%

$

2,000,000

$1,600,000

-20%

-Term Incentives

$

9,000,000

$4,000,000

(1)

-56%

$12,000,000

$6,400,000

-47%

(1)

Mr.

O’Hern’s

target LTIP grant value for 2019 was $6

million, but he volunteered to reduce the value by $2

million as described below.

The

ISS

analysis

does

not

appear

to

take

into

consideration

that

Mr.

O’Hern

volunteered

to

reduce

the

size of his 2019 long-term incentive award by $2 million, and such amount was instead used to fund an

incentive bonus pool for other senior executives (non-NEOs) tied to same center growth and EBITDA

growth.

4

Pay for Performance Alignment

ISS Methodology is Based on Reported Pay Not Realized or Realizable Pay

We believe realized or realizable pay is a superior measure than reported pay for alignment of pay and

performance. The majority of our CEO’s compensation opportunity is “at risk” and tied to performance

goals and our relative total stockholder return (“TSR”). Because a significant portion of our CEO’s

compensation opportunity is in the form of equity awards, the value is also tied to our absolute TSR. Our

pay-for-performance philosophy is illustrated by comparing target TDC to “realizable” compensation,

which after taking into account actual performance demonstrates alignment of pay and performance.

(1)

TDC for 2019 includes target LTIP grant value of $4 million, as Mr. O’Hern volunteered to reduce the size of his 2019 long-term incentive award by $2

million, and such amount was instead used to fund an incentive bonus pool for other senior executives (non-NEOs) tied to same center growth and EBITDA

growth.

5

Pay for Performance Alignment

As of December 31, 2018, none of the performance-based LTIP Units granted in 2016 were earned,

resulting in realized pay from performance based LTIPs being 0% of target and, further, none of the

performance-based LTIP Units granted in 2017 and 2018 would have been earned at December 31,

2018 based on our relative TSR performance as of such date.

(1)

The performance period for these awards remains open and the payout percentage for these awards has not been determined. The payout percentage is

reflected

as

0%

in

the

table

to

indicate

that,

if

the

performance

period

applicable

to

the

award

had

ended

as

of

December

31,

2018,

the

Company’s

relative

TSR

ranking considered for purposes of the awards would have been below the applicable Threshold level and the awards would have been forfeited. We make no

prediction as to the future performance of our stock.

We don’t believe there is better evidence of alignment of CEO pay and performance than that

illustrated by the foregoing. 

LTIP Performance Period

2016

2017

2018

2019

2020

Status

%Payout

2016 3-year LTIP

100%

Complete

Below Threshold and 100% Forfeited

0%

2017 3-year LTIP

67% Complete

Tracking Below Threshold

0%

(1)

2018 3

-year LTIP

33% Complete

Tracking Below Threshold

0%

(1)

6

New CEO Initial Equity Award

ISS’ Blanket Position Against Awards for Internal Promotions Does Not Reflect Market Realities

Mr.

O’Hern’s

equity award received upon his agreement to become our CEO was appropriate in light

of the market realities of what is necessary in attracting top candidates, whether internal or external,

to

fill

the

role

of

CEO.

We

disagree

with

ISS’

statement

that

“[l]arge

internal

promotion

grants

are

problematic, especially a grant that lacks performance-vesting criteria and which only requires

repayment of only half of the total value if the recipient leaves the company within four months of

assuming the CEO role.”

In early 2018, not only did Mr. A. Coppola announce his retirement by the end of the calendar year

but Mr. Perlmutter, our then COO, also announced that he would be stepping down from his position

with Macerich effective immediately.  Our Board determined that Mr. O’Hern was the right candidate

to fill the role of CEO, but given the departures of both the CEO and the COO, our Board believed

that it needed to entice Mr. O’Hern, one of the longest tenured CFOs in the S&P 500, to accept the

role. 

The

$5

million

equity

award

included

in

Mr.

O’Hern’s

agreement

is

consistent

with

similar

awards

granted to new CEOs of other similarly situated companies, particularly where equity enticement is

appropriate in retaining the right candidate for the role.

7

New CEO Initial Equity Award

The size of the award reflected our expectation that the 2019 target TDC of our CEO, CFO and the

next three highest paid executives would be significantly lower than the 2018 target TDC for our

CEO, CFO and next three highest paid executives given the reduction in the CEO compensation

package, the elimination of the COO position and corresponding compensation package as well as

the compensation packages of the remaining three highest paid executives.

The award was subject to a one-year clawback provision.

Given our Board’s focus on succession, the agreement with Mr. O’Hern helped to ensure an orderly

transition from Mr. A. Coppola to Mr. O’Hern. 

8

Overall Commitment to Corporate Governance

We ask for your support on Proposal 3 in the context of our strong commitment to corporate governance,

as evidenced by a number of profound corporate governance changes made by our Board in the recent

past:

opting out of Subtitle 8 of the Maryland General Corporation Law (often referred to as MUTA) and

prohibition from opting back in (including the provision allowing our Board to self-classify) without

stockholder approval;

allowing any stockholder to propose amendments to our Bylaws and removing the previous

requirement that stockholders meet certain ownership thresholds to do so;

demonstrated commitment to Board refreshment and diversity (women represent thirty percent of

our director nominees and six of our current directors have joined our Board since mid-2015); and

separating the role of CEO and Chairman, with our Lead Director transitioning to Independent

Chairman.

9

Conclusion

Strong

stockholder

support

for

Say-on-Pay

Proposals

We have received strong stockholder support for Say-on-Pay proposals in recent years

2016

over 97%

2017

approximately 89%

2018

approximately 89%

New

CEO

Compensation

The 2019 target TDC of Mr. O’Hern is 53% of his predecessor’s 2018 target TDC.

Aggregate

2019

Target

TDC

for

NEOs

The aggregate 2019 target TDC of Mr. O’Hern, our CFO and the next three highest paid executive

officers is expected to be approximately 63% of the 2018 target TDC for our CEO, CFO and three

highest paid executive officers.

Pay

for

Performance

Alignment

Our pay-for-performance philosophy is illustrated by comparing target TDC to “realizable”

compensation, which after taking into account actual performance demonstrates alignment of

pay and performance.

New

CEO

Initial

Equity

Award

The initial equity award to Mr. O’Hern was necessary to entice him to take the role of CEO

and is consistent with similar awards granted to new CEO’s of other similarly situated

companies, particularly where equity enticement is appropriate in retaining the right

candidate for the role.

10

Conclusion

Our Board of Directors and executive team are proud of their track record of working tirelessly in the

interests of our stockholders, with powerful initiatives in both areas of executive compensation and

corporate governance, that are beginning to bear fruit.

Our

Board

of

Directors

encourages

you

to

vote

FOR

the

approval

of

the

advisory

vote

on

the

compensation paid to our named executive officers (Proposal 3) at our Annual Meeting of Stockholders

on June 7, 2019.

Thank you for your continued support!