Top M&A lawyer defends high executive pay

By Muralikumar Anantharaman

NEW YORK (Reuters) - Leading M&A lawyer Martin Lipton gave a spirited defense of executive pay packages on Monday, insisting that U.S. corporate leaders deserve their multimillion-dollar pay packages.

Lipton defended former NYSE Chairman Richard Grasso's $187.5 million pay package, as well as IAC/InterActiveCorp CEO Barry Diller's 2005 compensation, estimated at close to $300 million, saying both men had helped build great firms.

A founding partner of Wachtell, Lipton, Rosen & Katz and the developer of the "poison pill" takeover defense mechanism, Lipton said such compensation levels were needed to retain top management.

"Most of the high executive compensation has stemmed from the equity incentive plans and there's no way in which they could have created that compensation unless the company prospered and the equity appreciated," Lipton argued at the Reuters Investment Banking Summit in New York.

"What's wrong, in some cases, is that the executive compensation is not related to the performance of the company. But how does a company get and retain top flight management other than by compensating them appropriately," he asked.

Grasso was forced out of the New York Stock Exchange in 2003 amid the public uproar caused by the disclosure of his pay package. Earlier this month, New York Attorney General Eliot Spitzer said in a court filing that Grasso should return $112.2 million in compensation to the Big Board.

Lipton, however, defended Grasso.

"I can't think of anybody who did more for the company or institution that he headed than Dick Grasso," Lipton said.

He also said that none of the shareholders in Diller's firms think he has been overpaid.

The Corporate Library in a recent study on CEO pay found that Diller received 100 percent of all the stock options granted at IAC/InterActiveCorp (IACI.O: Quote, Profile, Research, Stock Buzz) and ranked him the highest paid CEO in 2005, with $295 million in total compensation.

"He's another person who from nothing has created a fabulous company," Lipton said of Diller.

The lawyer also said UnitedHealth Group Inc. (UNH.N: Quote, Profile, Research, Stock Buzz) departing CEO William McGuire created a "great insurance company" and he was positive the firm's shareholders were not happy with his departure.

McGuire is one of the highest-profile executives who have been ensnared in corporate America's widening options backdating scandal. According to published reports, he stands to collect as much as $1.1 billion in options, retirement pay and other benefits when he departs.

"It's ridiculous to think that someone who creates a great company isn't entitled to having been superbly well compensated."