Simon 2018 Proxy Statement

COMPENSATION DISCUSSION AND ANALYSIS

DECISIONS ON PERFORMANCE-BASED LONG-TERM INCENTIVES IN 2017 AND 2018

Our executive compensation program has three major elements—Base Salary, Annual Cash Incentive Compensation, and Performance-Based Long-Term Incentives; however, the Company did not award any Performance-Based Long-Term Incentives to our NEOs in 2017. The Committee decided not to establish a 2017-2019 LTIP Plan after considering the request of Mr. David Simon, the Company’s CEO. This decision was primarily driven by the desire to contain costs and expenses due to the challenging business conditions existing in the retail industry at that time. We still believe that our decision not to include Performance-Based Long-Term Incentives in the compensation package for our NEOs in 2017, was the right decision based on the circumstances that existed at that time. Following the decision not to grant any Performance-Based Long-Term Incentives in 2017, the Committee decided to review the design of its Performance-Based Long-Term Incentives for possible changes that would ensure strong alignment of the interests of shareholders, the Company and its NEOs. The Committee asked Semler Brossy to assist in the redesign of the Performance-Based Long-Term Incentives program. 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 in the first quarter of 2018. A summary of the terms of this redesigned LTIP can be found in ‘‘Compensation Decisions for 2018’’ on page 33. The Committee will continue to study and, where it considers appropriate, implement improvements to our executive compensation program. 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, ‘‘best’’ governance practices, and overall industry performance. The Committee confirmed the use of this peer group by considering the methodology used by Institutional Shareholder Services, or ‘‘ISS.’’ The 2017 peer group reflects changes in the market capitalization of certain participants in the real estate industry. Changes from the 2016 peer group include the removal of one company (Avalon Bay Communities, Inc.) and the addition of one company (Prologis, Inc.). The 2017 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.

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