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US: CEOs with Defense Firms Double Salaries Since 9/11

The chief executives of the defense industry's largest companies have doubled their paychecks since 9/11 and the War on Terrorism began -- far greater than the average 7 percent growth for all corporate CEOs.

by Bryan BenderThe Boston Globe
August 30th, 2005

WASHINGTON -- The chief executives of the defense industry's largest companies are taking home paychecks that have more than doubled in the past four years -- far greater than the average 7 percent growth for all corporate CEOs, according to an independent study based on documents from the Securities and Exchange Commission.

Among the top three dozen publicly traded companies that do business with the Pentagon, pay for top corporate executives has skyrocketed since 2001, rising by an average of 200 percent compared with all top-tier chief executives at large, according to the annual study to be released today.

In one example, compensation for William H. Swanson, chief executive of Raytheon Company in Waltham, more than doubled to $5.3 million over his predecessor Dan Burnham's salary in 2001, according to the study by the Institute for Policy Studies, a liberal Washington think tank. After helping rescue the struggling company a few years ago, Ronald N. Tutor, CEO of Perini, a construction management firm in Framingham with reconstruction contracts in Iraq and Afghanistan, took home $14.3 million, the study found.

Conservative and libertarian groups say CEO pay increases are simply a reflection of rising corporate profits.

''As a company's fortunes fare, so do the CEOs and other top managers and that is the way it should work in the business world," said Charles Pena, director of defense policy studies at the libertarian Cato Institute in Washington. Pena acknowledged that because 'the vast majority of money these people make comes from taxpayer dollars," there are 'issues that need to be examined."

Keith Ashdown, president of the conservative Taxpayers for Common Sense in Washington, said seven- and eight-figure salaries draw attention, ''but it is only a small snapshot of what is going on." Defense companies are doing well, but ''is this war profiteering?" Ashdown asked. ''You have to look at it on a case-by-case basis."

Many factors come into play when calculating CEO pay -- bonus packages, a company's stock value, and its overall performance, including private contracts and government business. Nevertheless, defense companies always do better during wartime, and the study provides a glimpse into how Pentagon contractors have fared in the years since Sept. 11, 2001, and the invasion of Iraq.

''While it may not be fair to say they don't deserve to make what they are making, it is correct to question why they are making so much money," Pena said. ''Their profitability is tied to government policy decisions."

The Institute for Policy Studies, which opposes US military involvement in Iraq, produced the study with United for a Fair Economy, a liberal group based in Boston; this is the 12th year the two organizations have teamed to document corporate executives' compensation.

For the first time, the study included an analysis of the top 34 corporations whose work for the Pentagon amounted to at least 10 percent of their business.

Others highlighted in the study were United Technologies CEO George David, who earned $88 million in 2004, almost four times more than the $23 million he made in 2001. J. P. London, CEO of CACI, whose employees have served as interrogators in Iraq, saw his pay jump 170 percent to $3 million in 2004. Ronald Sugar, CEO of Northrop Grumman Corp., earned $6.7 million in 2004, an 8 percent reduction from 2001.

Sarah Anderson, one of the report's coauthors, said she believes the data are evidence of war profiteering and she is calling for greater congressional oversight on defense contracts, particularly those related to the war in Iraq and the US mission in Afghanistan.

A Raytheon spokesman declined to comment directly on the study and Perini executives did not return several calls.

''No matter what your position on the war, we should all be concerned about war profiteering," said Anderson, director of the economy program at Institute for Policy Studies. ''It's just not getting the attention it deserves nowadays."





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