Military Contractor CEOs Rank Highest Among Businesses
(MintPress) — Meet Bob Stevens, CEO for Lockheed Martin Corp., the U.S. government’s top military contracting company, serving the Defense Department, the National Security Agency and the Energy Department, among other government agencies.
Last year, Stevens earned $25.3 million. His company alone was awarded $16 billion in military contracts from 2009-2011. And in June, Stevens served as a main spokesperson against cuts to U.S. defense spending, claiming they would be devastating to the defense industry.
According to a Reuters report, Stevens said the cuts would result in the layoffs of 12,300 employees, noting that in the past three years, Lockheed had cut 18 percent of its workforce. The average wage of his employees sits at around $80,000.
“From an industry perspective, the near-term horizon is completely obscured by a fog of uncertainty,” he told reporters in June.
And now meet Dave Cote, CEO for Honeywell, a military contracting firm earning $915 million providing aerospace and logistical supports for troops in Iraq and Afghanistan. Cote is the sixth highest paid CEO in the country, earning $35.7 million yearly, according to an Associated Press study.
In 2010, he was appointed by U.S. President Barack Obama to serve on the National Commission on Fiscal Responsibility and Reform.
In that same year, Honeywell announced it had been awarded a $51 million government contract to provide engineering and logistics support for the U.S. Navy. Again in 2010, it received a $233 million two-year contract to provide logistics support to the U.S. Army in the U.S., Iraq and Afghanistan.
“Honeywell’s goal is to become the premier logistics provider for the U.S. armed forces, and we see it as a privilege to help keep our war fighters operational and effective by ensuring property is functioning when and where it is needed,” Honeywell Aerospace President Vince Trim said in a press release.
Comparing the costs
As the recession grabs hold of millions of middle- and lower-class Americans, CEOs benefiting from government contracts are experiencing all-time high salaries, on average raking in $21.5 million in 2011, according to the Securities and Exchange Commission filings.
The taxpayer funded salaries accounted for a daily payout exceeding what the average American worker makes in one day, which amounts to $45,230.
“To attract and retain the personnel it needs, the federal government must offer competitive compensation packages,” it states in a Congressional Budget Office analysis of federal civilian and military compensation. “For the military to recruit and retain qualified personnel, its compensation system must adequately reward service members for their training and skills as well as for the rigors of military life, particularly the prospect of wartime deployment.”
CEOs, however, do not experience the rigors of military life, nor the prospect of wartime deployment. Those who do serve in the military, however, make far less.
According to the Project on Government Oversight (PGO), the average compensation for enlisted military personnel is roughly $64,000, a far cry from $21.5 million. Those working in the defense and aerospace sectors for contractor companies make an average of $80,175.
Why so high?
Given the responsibility CEOs have, there’s no question that proper compensation should be made, with a wage higher than those who work under that given person. However, the discrepancy between military contractor CEOs and average business CEOs is quite vast.
According to a recent Associated Press study, the typical CEO in the U.S. in 2011 made roughly $9.6 million, a far cry from $25.1 million. The average salaries in 2011 for CEO are also on the rise, climbing 6 percent since 2010.
That same study shows that the average American worker would have to stay in the workforce for more than 200 years to make what their big bosses are claiming, and that’s if they aren’t employed by a military contractor, whose primary source of income stems from the government.
So why the cuts?
The Department of Defense is preparing to cut the budget by June, 2, 2013 by about $500 billion, as part of a total $1.2 trillion in cuts to government spending.
With the drawdown of wars in Iraq and Afghanistan, it seems a natural progression to look to the heavily funded defense industry. In 2012, the U.S. Department of Defense received $671 billion. The Education Department received roughly $68 billion, a department that cut back significantly across the board.
While there’s a general consensus among Congressmen and women that the budget must be trimmed back, to an extent, not everyone is pleased with the Department of Defense cuts.
Newly named Republican vice presidential candidate Paul Ryan has been a vocal opponent of the across-the-board cuts shared by the Defense Department. He’s made the case that national security should be placed in a separate category, not looked at as an area where there’s room for massive cuts. Instead, he’s looked at cutting social programs.
When Congress agreed to raise the debt ceiling, it also agreed to $1.2 trillion in cuts to the budget for 2013. And without another agreement defining where such cuts would hit, the impacts would be shared by government programs, including those in the defense sector. Ryan voted for the plan then, but has since said that another direction has to be taken, claiming it unfairly targets military spending.
“Defense spending is not half of all federal spending, but it’s half the cuts, approximately, in the sequester. We disagreed with that then and we disagree with it now,” he told a group of supporters Thursday in North Carolina.
The issue has not been raised, however, to look at competition among military defense contractors, who benefit largely from large government contracts.
POGO has argued for a cap on taxpayer-funded payments to defense contractors, and it has been a supporter of legislation that aims to do so. POGO’s Scott Amey spoke to the Subcommittee on Government Management, Organization and Procurement on contract reform in 2008. That particular subcommittee did hold a hearing on the matter, but it failed to move forward.
In its recent report, Sen. Chuck Grassley, a Republican from Iowa, argues that the government should take a look at some sort of contract reform, in order to mitigate costs.
“Private companies can pay their employees whatever they want, but federal contractors should not be able to pass on salary costs to taxpayers that are more than three times what a member of the president’s cabinet makes,” he said in a statement.
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