There's no business like - the National Defense Business. Honestly, if you want to rake in the big bucks the best gig on the planet is as a CEO in the defense industry.'
A joint study by the Institute for Policy Studies and United for Fair Economy, that included an analysis of the top three dozen publicly traded companies whose work for the Pentagon amounted to at least 10 percent of their business, found that the chief executives of these defense industry giants are cashing paychecks that have more than doubled, and in some cases risen 200%, since 9/11/01.
This despite the maximum benchmark compensation allowable under government contracts, set at $432,851 for 2004, a toothless attempt at government control over pay for public contractors. Since, it applies only to compensation costs charged under the contract and does not limit the compensation that an executive may otherwise receive. So, if a company's stock value shoots up because the War on Terrorism' has created a rosy outlook for the defense industry, a CEO may rake in tens of millions in options gains that are unaffected by the government benchmark.
While the rest of us are just trying to follow troop movements, these guys, to coin a phrase from the film All the President's Men,' follow the money' - our money. 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 (ya think?), and the study provides a glimpse into how Pentagon contractors, especially their CEOs, have fared in the years since the 2001 terrorist attack on our nation and the invasion of Iraq.
Let's look at some examples:
Compensation for William H. Swanson, chief executive of Raytheon Company, a self-described world leader in defense technologies,' more than doubled to $5.3 million over his predecessor Dan Burnham's salary in 2001. And, Ronald N. Tutor, CEO of Perini, a construction management firm with reconstruction contracts in Iraq and Afghanistan, took home $14.3 million.
United Technologies CEO George David, earned $88 million in 2004 (almost four times more than the $23 million he made in 2001) making him the highest-paid defense industry executive that year. David's high paycheck came in the same year that his company's Comanche helicopter program was canceled, after the US Army invested $6.9 billion and 21 years of effort into the helicopter (including 10 years with David at the helm). The Army decided that it wasn't worth the cost after the per-unit cost of the helicopter more than quadrupled over the course of the project.
David Brooks, CEO of bulletproof' vest maker DHB Industries, earned' $70 million in 2004, up 13,349 percent from $525,000 in 2001. That same year, Brook's sold company stock increasing his bank balance by another $186 million. Now, some might say that Brooks was well worth the bucks if his product saves troops lives but the US Marines are concerned that DHB's bulletproof vests may not be so bulletproof. In May of this year, the Marine Corps recalled 5,277 DHB Interceptor armored vests after questions were raised about the vests' ability to stop 9-mm pistol rounds.
J. P. London, CEO of CACI, whose employees serve as interrogators' in Iraq, saw his pay jump 170 percent to $3 million in 2004. That was the same year, in May to be precise, he spent a considerable amount of time dealing with the scandal over his employees' involvement in alleged prisoner abuse at Abu Ghraib. Despite the allegations and subsequent findings against CACI employees, the Army, in August 2004, awarded the firm a new contract for interrogation services in Iraq worth up to $23 million.
Northrop Grumman Corp. CEO Ronald Sugar was the only CEO to earn the distinction of receiving a paycheck in 2004 that was less than the check he received in 2001. But that 8 percent pay cut still garnered him a salary of $6.7 million. Not bad for a guy whose company is known for bungling the job of training the Iraqi National Army. Sugar became CEO on April 1, 2003, shortly after the US invasion. In June 2003, the company's Vinnell subsidiary subcontracted with Science Applications International to train nine 900-troop battalions for the Iraqi army. One year later, Major General Paul Eaton complained that "We've had almost one year of no progress." More than half of Vinnell's first battalion deserted. And, the US Army denied the firm an option in its contract to expand its services to all 27 battalions of the Iraqi army, and instead the Army has taken greater responsibility.
Halliburton CEO David Lesar took home $11.4 million in 2004, up from $4.2 million in 2003. The company jumped to the No. 1 slot among Iraq contractors when its Kellogg Brown and Root subsidiary received a no-bid contract in March 2003 for up to $7 billion for oilfield services. The Pentagon later canceled that contract but allowed Halliburton to obtain others. Currently, Halliburton holds 52 percent of Defense Department contracts for work in Iraq.
OK, so now that we've wended our way through this (partial) list of Who's Who Among War Profiteers, I suppose you're wondering what's the point?' So glad you asked! My point is this, while these guys are screaming, to coin another famous movie line, "show me the money" and being granted their wish, our troops are courageously screaming "show me the bad guys" and being paid diddley squat.
For example, a private earns $37,249.80 annually; a corporal $43,648.20; a captain $76,481.76; and a one star general $153,706.68. These salaries include "bonuses," just as the CEO salaries do. Only the bonuses for our fighting men and women include such extravagant items as combat pay ($625 a month regardless of rank), subsistence allowance and housing with dependents. Excuse my sarcasm here but when CEO Brooks of DHB receives $87,500 in compensation for foregone vacation' and our 50,000 or so military personnel, who look forward to earned breaks, receive stop-loss orders extending their periods of duty in Iraq I just can't help myself.
There are some, on the lunatic fringe as far as I'm concerned, who actually defend the sky-high CEO pay saying that such compensation is justified because corporate leaders bear tremendous responsibilities and must oversee complicated business activities. Excuse me? This just doesn't wash when their pay is compared to that of military leaders responsible for the lives of thousands of personnel and who command highly complex operations.
At the current rate of earnings it would take a private 2,362 years to earn the $88 million CEO David of United Technologies earns in one; a corporal 2,016 years; a captain 1,150; and a one star general 572.
OK, so comparing a military private's salary to a CEO's salary may be as apples are to oranges. I don't think so considering comparative risk, but just in case you're going there how about this: An army private earns 3 to 8 times less annually than a Private American security contractor working in Iraq, whose annual paycheck ranges from $120,000 to $300,000.
So all things considered seems to me if you follow the money you'll find there's a lot more that's slick about the war in Iraq than the oil.
Kyra Gottesman writes a weekly column for the Oroville Mercury-Register.