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Pentagon Contractor CEO Compensation is Second to None

$21.5 million.

A lottery winner's prize? The cost of a private plane or yacht?

How about the annual compensation of a major defense contractor’s Chief Executive Officer?

A Project On Government Oversight analysis of executive compensation at the top five Pentagon contractorsLockheed Martin, Boeing, General Dynamics, Northrop Grumman, and Raytheon – found that the average compensation package of a CEO at one of these firms was approximately $21.5 million last year, according to the firms’ Securities and Exchange Commission filings. Total compensation is the sum of base salary, bonuses, stock awards, option awards, incentive compensation, deferred compensation (including changes in pension value), and all other compensation.

Given the apocalyptic rhetoric some of these CEOs are using to describe planned reductions in Pentagon spending and their poor track record on job creation, we at POGO wanted to see just how many jobs could be provided for the price of just one of these CEOs. Here’s what we found:

  • The average worker in the U.S. earned $45,230 last year. These CEOs were paid more in an average day than the average American worker was paid all of last year.
  • According to a 2011 Congressional Budget Office analysis, the median compensation (including basic pay, allowances for food and housing, and tax advantages) for enlisted U.S. military personnel with ten years of experience was about $64,000. Thus, the Pentagon could afford to pay the salary of 335 soldiers with the money from just one top defense contractor’s compensation package.
  • The CEOs of these top Pentagon contractors are also making significantly more than their own workers. According to a Deloitte study, the average wage (just salary, not benefits) for the entire aerospace and defense industry in 2010 was $80,175. For the price of one CEO then, these firms could pay the salary of 268 defense and aerospace industry workers.
  • Even compared to other CEOs these Pentagon executives are making an enormous amount of money. An Associated Press study of S&P 500 CEO’s (i.e. the largest publicly traded companies) found that the typical CEO received $9.6 million in total compensation last year. Thus, the top Pentagon contractors could afford two CEOs with the compensation they’re using to pay their current CEOs.
CEOs vs. Workers

Click here to see just how much more defense CEOs make than workers.

These five CEOs weren’t even the highest paid heads of Pentagon contractors. That honor goes to David Cote, the CEO of Honeywell, whose $35.7 million compensation package made him the sixth highest paid CEO in the U.S. last year, according to the Associated Press study.

And, taxpayers are paying for part of this lavish compensation – a practice POGO has long fought against. A provision that passed the Senate Armed Services Committee and legislation that was introduced in the House this summer would reduce the cap on taxpayer-funded compensation for defense contractors, legislation POGO applauds.

“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,” said Sen. Chuck Grassley (R-Iowa) in a statement regarding the Senate’s provision.

If these CEOs are genuinely interested in minimizing job loss as they cut costs, they should realize that the most effective option is staring back at them in the mirror. In this tight economic climate taxpayers simply cannot afford to pay for this lavishness.

By: Ben Freeman, Ph. D.
Investigator, POGO

ben freeman At the time of publication, Ben Freeman was an investigator for the Project On Government Oversight. Ben's work focused on national security and the influence of foreign lobbying on the U.S.

Topics: Contract Oversight

Related Content: Defense

Authors: Ben Freeman, Ph. D.

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